Progressive (PGR) Up 2.2% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Progressive (PGR). Shares have added about 2.2% in that time frame, underperforming 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 drivers.

Progressive Q2 Earnings Surpass Estimates, Rise Y/Y

Progressive second-quarter 2020 earnings per share of $1.83 beat the Zacks Consensus Estimate of $1.72. Moreover, the bottom line increased 10.2% from the year-ago quarter.

Behind the Headlines

Net premiums written were $10.1 billion in the quarter under review, up 11% from $9.1 billion in the year-ago period. Net premiums earned grew 9% year over year to $9.6 billion.

Net realized gains on securities were $890.8 million, marking a nearly five-fold increase year over year.

Combined ratio — percentage of premiums paid out as claims and expenses — improved 27 basis points (bps) from the prior-year quarter’s level to 87.7.

June Numbers Solid

Operating revenues were $3.2 million, up 9.3% year over year. The improvement can be attributed to a 10.1% increase in premiums, 3.3% growth in fees and other revenues and 18.8% rise in service revenues. However, 16% lower investment income was a partial offset.

Total expenses increased 3.4% year over year to $2.7 billion due to 25.2% higher other underwriting expenses and 9.4% increase in policy acquisition costs. Expenses also include $16 million in policyholder credit expense.

In June, policies in force were impressive at the Personal Auto segment, having improved 11% from the year-ago month to 15.9 million. Special Lines improved 6% from the prior-year month’s figure to 4.8 million.

In Progressive’s Personal Auto segment, Direct Auto grew 13% year over year to 8.5 million while Agency Auto improved 9% year over year to 7.4 million.

Progressive’s Commercial Auto segment rose 6% year over year to 0.8 million. The Property business had about 2.3 million policies in force in the month, up 13% year over year.

Financial Update

Progressive’s book value per share was $27.63, as of Jun 30, 2020, up 25.7% from $21.98 as of Jun 30, 2019.

Return-on-equity in the second quarter of 2020 was 34.9%, having expanded 60 bps year over year. Debt-to-total capital ratio improved 40 bps year over year to 24.4% as of Jun 30, 2020.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Progressive has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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. Notably, Progressive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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