It has been about a month since the last earnings report for Progressive (PGR). Shares have lost about 6.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Progressive due for a breakout? 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 Q4 earnings Beat Estimates
The Progressive Corporation’s earnings per share of $1.81 beat the Zacks Consensus Estimate by 58.8% and grew 311% year over year.
Behind the Headlines
Net premiums written were $9.6 billion in the quarter under review, up 21% from $7.9 billion in the year-ago period. Net premiums earned grew 21% year over year to $9.9 billion from $8.2 billion a year ago.
Net realized gains on securities were $369.4 million.
Combined ratio — percentage of premiums paid out as claims and expenses — improved 10 basis points (bps) from the prior-year quarter’s level to 92.4%.
Full Year Highlights
Operating revenues rose 16.9% year over year to $37.9 billion driven by 27% higher investment income, 17% rise in premiums earned, 23% rise in service revenues and 19% higher fees as well as other revenues.
Total expense increased 18% to $33.8 billion. This increase can be primarily attributed to 17% rise in loss and loss adjustment expenses, 17% increase in policy acquisition costs, 33% increase in service expense and 19% increase in other underwriting expenses.
Policies in Force Solid in December
In December, "policies in force" were impressive at the Personal Auto segment, up 11% from the year-ago month to 14.9 million. Special Lines inched up 4% from the prior-year month’s figure to 4.5 million.
In Progressive’s Personal Auto segment, Direct Auto grew 12% year over year to 7.9 million while Agency Auto improved 10% year over year to 7 million.
Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about 2.2 million policies in force in the reported month, up 14% year over year.
Financial Update
Progressive’s book value per share was $22.54 as of Dec 31, 2019, up 27.3% from $17.71 as of Dec 31, 2018.
Return-on-equity on a trailing 12-month basis was 35%, up 1120 bps year over year. Debt-to-total capital ratio deteriorated 450 bps year over year to 24.4% as of Dec 31, 2018.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Progressive has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Progressive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
The Progressive Corporation (NYSE:PGR
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