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Bull of the Day: The Progressive Corporation (PGR)

Zacks

The Progressive Corporation (PGR) has seen its shares climb 21% so far this year and it looks poised for double-digit top and bottom-line growth in 2019. Progressive is also a solid dividend payer that has been on a strong run over the last few years.

Overview

Progressive is the third largest auto insurer in the U.S., behind only State Farm and Geico, and ahead of Allstate (ALL), with over $30 billion in premiums written in 2018. The company boasts roughly 11% of total market share and offers insurance for both personal and commercial automobiles, trucks, motorcycles, boats, recreational vehicles, and more. Progressive is also in the home insurance business and allows its customers to bundle auto and property together.

As we mentioned at the top, Progressive is a strong dividend payer. The company also operates a relatively unique system when it comes to returning value to its shareholder. Progressive pays an annual variable dividend, with the annual amount calculated based on the firm’s insurance operating performance for that particular year. The insurer paid out a dividend of $2.51 per share most recently, with a dividend yield of 3.48%. This looks impressive against the Insurance – Property and Casualty industry's yield of 1.6% and the S&P 500's 1.97% yield.


Furthermore, Progressive has increased its dividend four times during the last five years for an average annual increase of 17.12%. On top of its annual variable dividend, Progressive just recently announced that it will start to pay a quarterly dividend, which will begin at $0.10 a share. “We believe we've been great stewards of capital here at Progressive, and we certainly expect to continue to be,” Progressive CFO John Sauerland said on the company’s fourth-quarter earnings call.

“As a reminder, we produced returns on common shareholder equity in the high teens over many periods, including the past 20 years. We've also returned 70% of net income in the form of dividends or share repurchases.”

Outlook & Earnings Trends

Now that we have covered some of Progressive’s business and why it is a solid stock for income investors, it’s time to see what to expect from the company going forward. Our current Zacks Consensus Estimate calls for the company’s Q1 fiscal 2019 revenue to jump 18.5% from the year-ago period to reach $8.86 billion.

For the full year, Progressive is projected to see its revenue surge 16% to hit $37.55 billion. Peeking even further ahead, the company’s top-line is expected to climb roughly 11% above our current-year estimate in fiscal 2020.

At the bottom end of the income statement, Progressive also seems ready to post double-digit year over year growth. PGR’s adjusted current quarter EPS figure is projected to jump nearly 15% to reach $1.40 a share. Meanwhile, the company is expected to post similar growth for its adjusted full-year earnings, and its 2020 figure is projected to climb roughly 8% above 2019’s estimate.

Investors should also note that Progressive’s earnings estimate revision activity has trended upward recently. PGR’s 2019 and 2020 consensus earnings estimates have popped 5% over the last 90 days. This movement is important to monitor because it has been proven over the years that earnings growth leads to positive stock price movement over the long haul.

Bottom Line

Clearly at least some analyst are more bullish on Progressive’s longer-term earnings outlook, which helps the company earn a Zacks Rank #1 (Strong Buy) at the moment. The insurer also sports a “B” grade for Growth in our Style Scores system. And Progressive is trading with at P/E of 14.2, which is not too far above its industry’s average 12.8 average.

Progressive stock opened trading Friday at $71.72 a share, just slightly below its 52-week high of $73.78. Shares of PGR have surged 21% in 2019 to outpace the S&P 500. The company’s stock price has also soared over 100% during the last three years as it expands its business.

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