On May 28, 2015, Zacks Investment Research upgraded Progressive Corp. PGR to a Zacks Rank #2 (Buy).
Progressive Corp. has been witnessing increasing earnings estimates following its solid first-quarter 2015 results as well as strong performance in April.
In the first quarter, Progressive Corp. delivered operating earnings of 46 cents per share that outperformed the Zacks Consensus by 7% and increased about 12% year over year on a higher top line. Revenues in turn were driven by higher premiums as well as investment income. With respect to the earnings trend, this property and casualty insurer delivered a positive surprise in each of the last four quarters, with an average beat of 20.29%.
Earnings in April also improved on top-line growth. Policies in force continue to remain healthy with both Personal Auto and Special Lines exhibiting an increase.
Progressive Corp. has also been consistently putting in efforts to further penetrate customer households through cross-selling auto policies and Progressive Home Advantage (PHA). To that end Progressive Corp. acquired the majority stake in ARX Holding Corp. This acquisition is expected help the company in reaching the still under-penetrated market segment of bundled customers. Going forward, we expect Progressive Corp. to make further acquisitions, thereby enhancing its bundling strategy.
To enhance its shareholders’ value, the company engages in regular buybacks and annual dividend payouts. It spent $65.9 million on repurchasing 2.5 million shares in the first quarter of 2015 and has 17.5 million shares remaining under its authorization.
These positives resulted in an upward revision of the Zacks Consensus Estimate for 2015 and 2016 in the last 60 days. It increased 3.9% to $1.88 for 2015 and by 1% to $1.92 for 2016. The expected long-term earnings growth rate for the stock is 9%.
Other Stocks to Consider
Investors interested in property and casualty insurer can also look at Endurance Specialty Holdings Ltd. ENH, Markel Corp. MKL, and State Auto Financial Corp. STFC. All these stocks sport a Zacks Rank #1 (Strong Buy).
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