The Progressive Corporation PGR is expected to report an improvement in its top and bottom lines when it reports first-quarter 2025 results on April 16, before the opening bell.

See the Zacks Earnings Calendar to stay ahead of market-making news.

The Zacks Consensus Estimate for PGR’s first-quarter revenues is pegged at $20.4 billion, indicating 19.3% growth from the year-ago reported figure.

The consensus estimate for earnings is pegged at $4.60 per share. The Zacks Consensus Estimate for PGR’s first-quarter earnings has moved up 7.7% in the past 30 days. The estimate suggests year-over-year growth of 23.3%. 
 

Image Source: Zacks Investment Research

Solid Earnings Surprise History

Progressive’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 18.49%. This is depicted in the following chart.

Image Source: Zacks Investment Research

What the Zacks Model Unveils for PGR

Our proven model predicts an earnings beat for Progressive this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. 

You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Earnings ESP: PGR has an Earnings ESP of +4.31%. This is because the Most Accurate Estimate of $4.80 is pegged higher than the Zacks Consensus Estimate of $4.60.

Zacks Rank: PGR carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Likely to Shape Q1 Results

Revenues in the first quarter are likely to have benefited from improvement in premiums, and higher net investment income as well as fees and service revenues.

A compelling product portfolio, leadership position, strength in the Vehicle and Property businesses, healthy policies in force and solid retention are likely to have aided net premiums earned. The Zacks Consensus Estimate for net premiums earned is pegged at $19.2 billion. 

The personal auto business is likely to have benefited from competitive product offerings and a strong market presence. Focusing on segmentation and prudent risk selection is likely to have aided policies in force. Both agency and direct auto channels are likely to have driven policy growth.

Net investment income is expected to have benefited from a higher invested asset base. The Zacks Consensus Estimate for the metric is pegged at $795 million. However, the company is likely to have incurred pretax net realized losses on securities. The Zacks Consensus Estimate for the metric is pegged at a loss of $19.3 million.  

Higher loss and loss-adjustment expenses, policy acquisition costs and other underwriting expenses are likely to have raised expenses.  The consensus mark for loss and loss-adjustment expense ratio is pegged at 65.

Despite catastrophe losses, prudent underwriting is likely to have aided improvement in the combined ratio. The consensus mark for combined ratio is pegged at 86.

PGR’s Price Performance & Premium Valuation

The stock outperformed the industry, sector and the Zacks S&P 500 composite index in 2024. PGR stock is not that cheap, as its Value Score of C suggests a stretched valuation at this moment.

Image Source: Zacks Investment Research

The stock is trading at a price-to-book value of 6.26X, higher than the industry’s 1.59X.

Image Source: Zacks Investment Research

It is also expensive compared with other industry players like The Allstate Corporation ALL and The Travelers Corporation TRV.

Investment Thesis

Progressive strategically bundles auto insurance with lower-risk property coverage. The auto insurer enhances segmentation efforts and boosts policy life expectancy — a key indicator of customer retention — by rolling out its latest product model and implementing careful pricing strategies. Additionally, Progressive is investing in digitalization initiatives, all of which are expected to sustain and drive continued growth. PGR has a Growth Score of B.

PGR’s combined ratio averaged less than 93% in the last 10 years and compared favorably with the industry average of more than 100%. Prudent underwriting coupled with favorable reserve development, a reinsurance program to shield its balance sheet from the impact of catastrophe events and active weather years should limit the erosion of profit.

PGR’s solid capital helps it navigate a volatile market and invest in growth opportunities. 

Though leverage compares unfavorably with the industry average, its debt-servicing capabilities remain solid and also compare favorably with the industry. 

Conclusion

Progressive is one of the nation’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance, and one of the top 15 homeowners carriers based on premiums written. It remains committed to enhancing customers' experience through improved services. Despite increasing expenses, PGR remains committed to expanding margins. 

An impressive dividend history, its VGM Score of B, growth prospects, favorable return on capital and positive investor sentiment instill confidence. 

Thus, despite a premium valuation, this stock is worth adding to one’s portfolio.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report

The Allstate Corporation (ALL) : Free Stock Analysis Report

The Progressive Corporation (PGR) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research