Is Progressive Stock Still Worth Buying Post Q4 Earnings?

The Progressive Corporation PGR reported solid fourth-quarter 2024 results, wherein both the top and bottom lines increased year over year. Net premiums written improved 20%, driven by the strong performance of operating businesses.Combined ratio — the percentage of premiums paid out as claims and expenses — improved 80 basis points (bps) from the prior-year quarter’s level to 87.9%.PGR is one of the country’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. This insurer is set to deliver steady profitability given its solid market presence, a convincing portfolio of products and services, and underwriting and operational expertise.A Sneak Peek Into PGR’s Q4 ResultsPGR’s fourth-quarter 2024 earnings per share of $4.08 beat the Zacks Consensus Estimate by 19%. The bottom line increased 37.8% year over year.  Operating revenues increased 20.3% year over year to $20.3 billion and beat the consensus estimate by 2.5%.Policies in force were solid in the Personal Lines segment, increasing 18% from the year-ago month’s figure to 33.8 million. Special Lines improved 9% to 6.5 million. In the Personal Auto segment, Direct Auto increased 25% year over year to 14 million, while Agency Auto increased 17% to 9.8 million. Progressive’s Commercial Auto segment rose 4% year over year to 1.1 million. The Property business had 3.5 million policies in force, up 14%.Factors Favoring PGRPrioritizing auto bundles, lowering exposure to risky properties and increasing segmentation through the rollout of new products should drive growth for this insurer. PGR remains focused on increasing the share of auto and home bundled households, investments in mobile applications and the rollout of new products in a higher number of states. Its premiums, the primary contributor to its top line, is poised to benefit from a compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio.PGR’s Policy life expectancy (PLE), a measure of customer retention, has improved in the last few years across all business lines. Distinctive new auto insurance option along with competitive pricing should help sustained improvement in PLE.Over a decade, PGR’s combined ratio has averaged less than 93%, which compares favorably with the industry average combined ratio of more than 100%. Prudent underwriting coupled with favorable reserve development should help the company maintain the momentum. Also, its reinsurance program shields the balance sheet from the impact of catastrophe events and active weather years. Its solid cash flow ensures continuous investment in digitalization to improve margins. PGR is continually improving its book value and lowering leverage banking on operational expertise. Though its leverage compares unfavorably with the industry average, the times interest earned outperforms the industry.Optimistic Analyst Sentiment on PGRThree analysts raised 2025 estimates, while two raised the same for 2026 in the past seven days. The Zacks Consensus Estimate for 2025 has moved 0.3% higher, while the same for 2026 moved 3.3% north in the same time frame.Image Source: Zacks Investment ResearchPGR’s Growth StoryThe Zacks Consensus Estimate for Progressive’s 2025 earnings is pegged at $14.08 per share, indicating an increase of 0.2% from the year-ago reported figure on 16% higher revenues of $87.1 billion. The consensus estimate for 2026 earnings is pegged at $14.60 per share, indicating a year-over-year increase of 8.4% on 10.2% higher revenues of $96 billion. The long-term earnings growth rate is currently pegged at 27.4%, better than the industry average of 11.5%. The company has a Growth Score of A.Progressive’s YTD PerformanceShares of Progressive have gained 4.1% year to date, outperforming the industry’s increase of 3.5%  and the Zacks S&P 500 composite’s increase of 3.5% in the said time frame. The outperformance is backed by a compelling product portfolio, operational expertise and a solid capital position. However, the stock has underperformed the Finance sector’s rise of 5.5%PGR vs Industry, Sector, S&P 500Image Source: Zacks Investment ResearchPGR Trading Above 50-Day Moving AverageProgressive shares are trading above the 50-day moving average, indicating a bullish trend.PGR Price Movement Vs. 50-Day Moving AverageImage Source: Zacks Investment ResearchAverage Target Price for PGR Suggests a Solid UpsideBased on short-term price targets offered by 18 analysts, the Zacks average price target is $283.00 per share. The average suggests a potential 14.9% upside from Thursday’s closing price.Image Source: Zacks Investment ResearchPGR Shares Are ExpensivePGR is currently expensive. It is trading at a P/B multiple of 5.38, higher than the industry average of 1.6. Given its market-leading presence, growth prospects, rising estimates and better return on invested capital, its premium valuation is justified. Image Source: Zacks Investment ResearchShares of some other auto insurers like Allstate Corporation ALL and Travelers Companies TRV are also trading at a premium to the industry.Progressive’s Favorable Return on CapitalReturn on equity (ROE) for the trailing 12 months was 34.3%, comparing favorably with the industry’s 7.6%. This reflects its efficiency in utilizing shareholders’ funds. Image Source: Zacks Investment ResearchAlso, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects PGR’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 24.1%, better than the industry average of 5.8%.Image Source: Zacks Investment ResearchParting Thoughts on PGR StockProgressive’s leadership position, coupled with a compelling product and service portfolio, continues to enhance customers’ experience, which, in turn, helps it grow policies in force through better retention and the addition of new customers. Growth projections and positive analyst sentiment fuel optimism for PGR. Progressive has an impressive history of paying dividends uninterruptedly since 1971. Its VGM Score of A instills confidence in the stock. Thus, investors who own the stock should retain it in their portfolio.Given the premium valuation, new investors should wait for a favorable entry point for this Zacks Rank #3 (Hold) stock. 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(TRV): Free Stock Analysis Report The Allstate Corporation (ALL): Free Stock Analysis Report The Progressive Corporation (PGR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks