On Dec 20, Zacks Investment Research upgraded Progressive Corp. (PGR) to a Zacks Rank #2 (Buy).
Why the Upgrade?
Progressive has been witnessing improving earnings estimates following a recent acquisition, rating affirmations and a solid third-quarter earnings beat.
In its concerted effort to be a one-stop insurance shopping destination, Progressive inked a deal to buy the majority stake in ARX Holding Corp., the parent company of American Strategic Insurance (ASI) and its affiliates. This transaction will help it to tag home with auto insurance. In addition, Progressive stands to gain a competitive edge with expanded scale and skill.
Recently, A.M. Best Co. and Moody's Investors Service of Moody’s Corp. (MCO) affirmed the ratings on Progressive. A.M. Best Co. reiterated the issuer credit ratings (ICR) of “a”of Progressive and financial strength rating (FSR) of A+ (Superior) and the ICR of “aa” of its operating subsidiaries. The rating affirmations came on the back of sturdy capitalization, strong operating performance and competitive advantages, multiple channel distribution network and efficient underwriting and claims handling technology.
Moody's reiterated the insurer financial strength (IFS) of Aa2 of Progressive’s operating subsidiaries owing to the company’s solid insurance foothold in the U.S. auto insurance market, improved underwriting performance, efficient expense management and a solid balance sheet. Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as in maintaining credit worthiness in the market.
With respect to the earnings trend, this insurer has delivered positive surprise in all the last four quarters with an average beat of 9.29. In the last reported quarter, Progressive posted earnings of 46 cents that outperformed the Zacks Consensus Estimate by 6.98% and year-ago figure by 28%. Higher premiums largely drove the upside.
These positives prompted a rise in the Zacks Consensus Estimate for 2014 and 2015 as most of the estimates moved up over the last 60 days. It increased about 2% to $1.76 for both 2014 and 2015.
The above factors clearly indicate that Progressive is a good investment choice at present and is likely to outperform the broader market in the near team.
Other Stocks to Consider
Investors interested in the property and casualty insurers can take a look at AmTrust Financial Services, Inc. (AFSI) and Navigators Group Inc. (NAVG). Both carry a Zacks Rank #2 (Buy).
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