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Why Is Progressive (PGR) Up 1.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Progressive (PGR - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Progressive due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Progressive Q1 Earnings Top Estimates, Revenues Up Y/Y

Progressive's first-quarter 2019 earnings per share of $1.83 beat the Zacks Consensus Estimate of $1.38. The bottom line improved 50% from $1.22 earned in the year-ago quarter.

Behind the Headlines

Net premiums written were $9.2 billion in the quarter under review, up 16% from nearly $8 billion in the year-ago period. Net premiums earned grew 18% year over year to $8.5 billion from $7.2 billion a year ago.

Net realized gains on securities were $414.5 million against the year-ago loss of $48.2 million.

Operating revenues were $8.9 million, up 19% year over year. The improvement was owing to an 18% increase in premiums, 52% higher investment income, and 25% growth in fees and other revenues as well as service revenues. The top line however marginally missed the Zacks Consensus Estimate.

Total expenses increased 19% year over year to $7.7 billion driven by 18% rise in losses and loss adjustment expenses, 19% increase in policy acquisition costs and 19% higher other underwriting expenses.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 40 basis points (bps) from the prior-year quarter’s level to 88.8%.

Policies in Force Solid in March

In March, policies in force were impressive at the Personal Auto segment, having improved 13% from the year-ago month to 13.9 million. Special Lines improved 3% from the prior-year month’s figure to 4.4 million.

In Progressive’s Personal Auto segment, Direct Auto grew 12% year over year to 6.6 million while Agency Auto improved 15% year over year to 7.3 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about 2 million policies in force in the reported month, up 21% year over year.

Financial Update

Progressive’s book value per share was $19.89 as of Mar 31, 2019, up 12.3% from $17.71 as of Dec 31, 2018.

Return-on-equity for March 2019 was 30.4%, having expanded 940 bps year over year. Debt-to-total capital ratio improved 220 bps year over year to 26.7% as of Mar 31, 2019.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Progressive has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Progressive has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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