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Is a Beat in the Cards for Progressive (PGR) in Q3 Earnings?

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We expect Progressive Corporation (PGR - Free Report) to surpass expectations in third-quarter 2017 results before the opening bell on Oct 17.

Why a Likely Positive Surprise?

Our proven model shows that Progressive has the right combination of two key ingredients to beat estimates.

Zacks ESP: Progressive has an Earnings ESP of +2.14%. This is because the Most Accurate estimate of 41 cents per share is pegged higher than the Zacks Consensus Estimate of 40 cents. A stock’s positive ESP indicates confidence about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Progressive carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of an earnings beat.

Conversely, we caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement.

Factors Driving the Better-Than-Expected Earnings

Premiums having been improving over the last few quarters, are expected to increase in the third quarter owing to solid policies in force across Personal and Commercial Lines.

A gradually improving interest rate environment has likely driven investment income higher. These in turn will help top line rise year over year. The Zacks Consensus Estimate for revenues is currently pegged at $6.8 billion, up 14.1%.

Owing to a diversified product portfolio and competitive pricing, retention ratio has possibly remained solid.  

An active catastrophe environment has deteriorated loss ratio in the soon-to-be-reported quarter. The company had already reported 12.6 loss ratio points of catastrophe losses for August due to Hurricane Harvey. Vehicle and Property businesses will be affected the most.

With respect to the earnings trend, the company delivered positive surprises in two of the last four quarters with an average beat of 6.88%.  

The company’s share price has been trending downward over the last few days and is currently trading at $48.67 per share. We wait to see how the stock performs post the earnings release.

Progressive Corporation (The) Price and EPS Surprise

Other Stocks to Consider

A few other stocks worth considering from the same space with the right combination of elements to come up with an earnings beat this quarter are:

Aflac Inc. (AFL - Free Report) is set to report third-quarter earnings on Oct 25. The stock has an Earnings ESP of +1.31% and carries a Zacks Rank of 3 as well. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMERISAFE, Inc. (AMSF - Free Report) has an Earnings ESP of +3.04%. This Zacks #3 Ranked company is set to report third-quarter earnings on Oct 25.

Torchmark Corp. (TMK - Free Report) is set to report third-quarter earnings on Oct 24. The #3 Ranked stock has an Earnings ESP of +0.14%.

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