On Mar 20, Zacks Investment Research upgraded Progressive Corp. (PGR - Analyst Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Estimates of Progressive have remained steady following strong fourth-quarter results and a special dividend payout on the back of consistent improvement in operating leverage. A strong balance sheet and favorable financial strength rating also augur long-term growth for this property-casualty insurer. The long-term expected earnings growth rate for this stock is 6.8%.
On Jan 18, Progressive reported fourth-quarter operating earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 34 cents. Earnings were primarily driven by 9% year over year growth in net premiums and 111% escalation in net realized investment gains. The upsides were partially offset by higher claims and expenses that also deteriorated the combined ratio.
Meanwhile, Progressive publishes monthly financial reports. The company’s operating earnings and premiums’ growth as well as debt-to-total capital ratio in January and February of this year have also reflected overall constant improvement.
Progressive remains focused on maintaining a healthy policy life expectancy, which is a significant measure to retain customers. The Commercial Auto business is also exhibiting improvement by recording year-over-year growth over the past few months. Going ahead, we believe that the company is poised to benefit from impressive operating performances and its market leading position.
Based on the progress and a total of 39 cents generated in Jan and Feb, Progressive will likely beat the year-ago earnings and the Zacks Consensus Estimate of 42 cents, in the first-quarter of 2013.
Over the last 60 days, 11 of 16 estimates were revised upward with just 1 downward revision, which pushed the Zacks Consensus Estimate for 2013 up by a cent to $1.49 per share. For 2014, 5 out of the 17 estimates were revised upward over the last 60 days, while 2 were revised downward. This lowered the Zacks Consensus Estimate by a penny to $1.59.
Other Stocks to Consider
Apart from Progressive, other stocks that are outperforming in the insurance sector include CNO Financial Group Inc. (CNO - Analyst Report), XL Group Plc (XL - Analyst Report) and Montpelier Re Holdings Ltd. (MRH - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).