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Investing.com - Progressive Corp. (NYSE:PGR) stock maintained its Buy rating from Goldman Sachs, which reiterated its $305.00 price target following the company’s June operating results that exceeded expectations. According to InvestingPro data, Progressive, with its $144.5 billion market cap, maintains a "GREAT" financial health score and appears undervalued based on Fair Value analysis.
The insurance provider reported June operating earnings per share of $1.67, significantly outperforming both the Visible Alpha Consensus estimate of $1.14 and Goldman Sachs’ estimate of $1.23. The earnings beat was primarily driven by a better-than-expected underlying loss ratio, lower catastrophe losses, and favorable prior year development. InvestingPro data shows 16 analysts have revised their earnings upward for the upcoming period, with the company trading at an attractive PEG ratio of 0.32, suggesting good value relative to growth. Get access to 10+ additional ProTips and comprehensive analysis with an InvestingPro subscription.
Progressive’s personal auto year-over-year policies in force growth reached 19.2%, slightly above analyst expectations of 19.1% and consensus estimates of 18.9%. The company added 238,000 policies month-over-month, with both direct and agency channels performing in line with Goldman Sachs’ projections.
The insurer’s net premium written growth of 14.9% fell below Goldman Sachs’ expectation of 16.3% and consensus estimates of 17.4%, mainly due to lower-than-anticipated growth in personal auto premiums. However, Progressive’s total company underlying combined ratio of 85.1% beat Goldman Sachs’ estimate of 86.7%, with particularly strong performance in commercial and property lines.
Catastrophe losses for June totaled $223 million, resulting in a 3.2% catastrophe loss ratio that outperformed analyst expectations of 4.8%, with the company citing Texas storms as the primary driver of the month’s catastrophe losses.
In other recent news, Progressive Corp. reported second-quarter earnings that surpassed analyst expectations, with adjusted earnings per share reaching $5.40, exceeding the anticipated $4.36. The company’s revenue for the quarter was $20.08 billion, slightly below the consensus estimate of $20.48 billion, yet it marked a 12% increase from the previous year. Progressive’s combined ratio improved to 86.2%, indicating enhanced underwriting profitability compared to 91.9% in the prior year. Net income more than doubled, reaching $3.18 billion, a 118% increase from the previous year’s second quarter. The company saw robust policy growth, with personal auto policies showing significant gains; agency auto policies rose 16%, and direct auto policies increased by 21%.
Additionally, Progressive reported $387 million in pretax net realized gains on securities, contrasting with a loss of $127 million in the same period last year. Despite these strong results, Evercore ISI downgraded Progressive from Outperform to In Line, citing a more balanced risk/reward profile and minimal expected earnings growth due to market cycle positioning. Evercore ISI also noted a decrease in consensus earnings revisions and highlighted potential impacts on auto policy growth due to seasonality.
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