We expect property and casualty insurer Progressive Corp. (PGR) to beat expectations when it reports third-quarter 2014 results on Oct 10.
Why a Likely Positive Surprise?
Our proven model shows that Progressive Corp. is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.33%. This is a very meaningful and leading indicator of a likely positive earnings surprise.
Zacks Rank: Progressive Corp. has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. The combination of the company’s Zacks Rank #2 and +2.33% ESP makes us confident of an earnings beat this release.
What is Driving the Better-than-Expected Earnings?
Given its expanded multi-product offering, policies in force as well as policy life expectancy, a measure for customer retention will exhibit improvement.
The company undertook several initiatives aimed at providing consumers with distinctive new auto insurance options. The fastest personal auto growth area continues to be in Internet-produced business. Also, Progressive’s Snapshot and Name Your Price programs are expected to drive growth.
Owing to a favorable catastrophic environment, the combined ratio continues to show improvement.
Continued share buyback will boost the quarter’s bottom line.
The positive trend is backed by the trailing two-quarter average surprise of 15.1%, much of which was contributed by the impressive 27.7% surprise achieved in the last quarter. Higher premiums continue to aid the company’s performance.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter:
Platinum Underwriters Holdings Ltd. (PTP), Earnings ESP of +51.65% and a Zacks Rank #1 (Strong Buy)
The Travelers Companies, Inc. (TRV), Earnings ESP of +15.52% and a Zacks Rank #2
ACE Limited (ACE), Earnings ESP of +7.02% and a Zacks Rank #2
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