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Progressive Q2 Preview: Can Shares Remain Strong?

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It goes without saying that we’ve found ourselves in a highly unique economic environment following a once-in-a-lifetime pandemic.

The first quarter of 2022 was one for the books, but not in the way that investors hoped. Valuation slashes were widespread as companies revealed they had battled margin compression and supply chain disruptions.

Nonetheless, the market rolls on, and the second round of quarterly reports is just around the corner.

This week, however, we still have a wide selection of companies slated to report quarterly results. One such company is The Progressive Corporation (PGR - Free Report) . Progressive is a leading independent agency writer of private passenger auto coverage and the market share leader for motorcycle products since 1998.

The company is a Zacks Rank #3 (Hold) with an overall VGM Score of an A. Additionally, Progressive resides within the Zacks Finance Sector.  

Let’s take a closer look at the company and see where it stands heading into the quarterly report.

Share Performance & Valuation

Year-to-date, Progressive shares have been a bright spot in an otherwise dim market, increasing nearly 16% in value and extensively outperforming the S&P 500.

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Image Source: Zacks Investment Research

The price action of PGR shares is just as stellar upon expanding the timeframe to encompass the last year; shares have climbed nearly 25%, crushing the general market’s decline of nearly 12%.

Zacks Investment Research
Image Source: Zacks Investment Research

Progressive’s forward P/E ratio resides on the higher side at 25.9X, well above above its five-year median value of 15.4X. Additionally, shares trade at a steep 85% premium relative to its Zacks Sector.

PGR has a Value Style Score of a B.

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Image Source: Zacks Investment Research

Quarterly Performance & Share Reactions

PGR has recently struggled in quarterly reports, reporting bottom-line results under expectations in three of its last five quarters. In its latest quarter, the company missed the Zacks Consensus EPS Estimate by nearly 10%.

Top-line results have left much to be desired as well – Progressive has reported quarterly sales below expectations seven times out of its last ten quarterly reports.

Additionally, the market has primarily reacted poorly to bottom-line beats; out of Progressive’s previous five EPS beats, shares have moved upwards just once.

Growth Estimates

For the quarter to be reported, the Zacks Consensus EPS Estimate resides at $0.92, penciling in a 40% decrease in quarterly earnings year-over-year. Over the last 60 days, six of the seven estimate revisions have been downward, with the Consensus Estimate Trend retracing approximately 5%.

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Image Source: Zacks Investment Research

However, the top-line is forecasted to expand notably, with the $12.8 billion quarterly sales estimate registering a double-digit 11% increase from the year-ago quarter.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

The strong price action of Progressive shares is undoubtedly a major positive. Investors have certainly enjoyed the green in a market filled with red year-to-date returns.

Heading into the quarterly report, PGR has an Earnings ESP Score of 1.7%. Pairing a Zacks Rank #3 (Hold) or higher with a positive Earnings ESP Score pushes the odds of an EPS beat higher.

Earnings are forecasted to decline, but revenue is estimated to increase. Additionally, investors should be aware that the market generally acts poorly towards the company’s EPS beats.

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