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Can Progressive (PGR) Earnings Beat Estimates This Season?

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We expect The Progressive Corporation (PGR - Free Report) to surpass expectations in fourth-quarter 2017 results before the opening bell on Jan 24.

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 +0.52%. A stock’s positive ESP raises 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 #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have significantly higher chances of an earnings beat.

Conversely, we caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

Progressive’s top line is expected to benefit from improving premiums as well as investment income. The Zacks Consensus Estimate for revenues is pegged at $7.02 billion, up 17.1%.

Solid policies in force across Personal and Commercial Lines likely have driven improved premiums in the quarter.

Retention ratio too has possibly remained solid owing to competitive pricing and a diversified product portfolio.

However, expenses are anticipated to have increased due to higher losses and loss adjustment expenses plus policy acquisition costs as well as underwriting expenses.

California wildfires inducing catastrophe loss is estimated to have weighed on underwriting profitability, deteriorating the combined ratio.

With respect to its earnings trend, the company delivered positive surprises in two of the last four quarters with an average beat of 6.79%.  

Other Stocks to Consider

A few other stocks worth considering from the insurance industry with the right combination of elements to beat estimates this time around are:

American Financial Group Inc. (AFG - Free Report) has an Earnings ESP of +1.21% and a Zacks Rank of 2. The company is set to report fourth-quarter earnings on Jan 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNA Financial Corporation (CNA - Free Report) has an Earnings ESP of +2.75% and a Zacks Rank of 1. The company is expected to release fourth-quarter earnings on Feb 5.

Mercury General Corporation (MCY - Free Report) is set to announce fourth-quarter earnings on Feb 5. The stock has an Earnings ESP of +6.49% and is a Zacks #1 Ranked player.

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