Progressive stock downgraded by Evercore ISI as cycle limits growth potential

Investing.com - Progressive Corp. (NYSE:PGR), the $144 billion insurance giant with a "GREAT" financial health score according to InvestingPro, has been downgraded by Evercore ISI from Outperform to In Line with a price target of $275.00.

The downgrade comes despite Evercore ISI’s bullish stance on Progressive stock over the past two years, with the firm now seeing a more balanced risk/reward profile for the insurance company.

Evercore ISI cited Progressive’s position in the current market cycle as a key factor limiting potential for multiple expansion, noting that earnings growth is expected to be minimal over the next year as margins normalize.

The research firm also pointed to less positive consensus earnings revisions, which have decreased to approximately 1% from over 5% as recently as March this year, suggesting earnings may matter less as Progressive is "over earning" with a combined ratio below 90%.

While acknowledging Progressive as "one of the highest quality companies" in their coverage universe, Evercore ISI noted slowing auto policy-in-force growth that will likely face increased seasonality impacts in the second half of the year.

In other recent news, Progressive Corp reported second-quarter earnings that significantly surpassed analyst expectations. The company posted adjusted earnings per share of $5.40, exceeding the analyst estimate of $4.36. Revenue for the quarter was $20.08 billion, slightly below the consensus estimate of $20.48 billion, but still marking a 12% increase from the previous year. Progressive’s net income more than doubled to $3.18 billion, up 118% from the second quarter of 2024. The company’s combined ratio, a measure of underwriting profitability, improved to 86.2%, down from 91.9% last year. Progressive experienced robust policy growth, with total policies in force increasing 15% year-over-year to 37.32 million. Agency auto policies rose 16%, while direct auto policies saw a 21% increase. Additionally, the company reported $387 million in pretax net realized gains on securities, compared to a loss of $127 million in the previous year.

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