On Wednesday, CFRA maintained its Buy rating on Progressive Corp. (NYSE: NYSE:PGR) and increased the stock's price target to $290 from the previous $245. The adjustment comes after the insurance company reported strong third-quarter earnings that exceeded expectations.
The new 12-month price target represents a significant hike, setting Progressive's shares at 20.4 times the firm's projected operating earnings per share (EPS) for 2026, which has been raised by $0.70 to $14.25. It also values the stock at 21.3 times the updated 2025 EPS estimate of $13.60, an increase of $1.20. This valuation surpasses Progressive's three-year average forward multiple of 21 times and is well above the 12.2 times average of its industry peers.
The firm also revised its 2024 EPS estimate upwards by $1.63 to $12.85, and its fourth-quarter EPS estimate increased by $0.40 to $2.86. This revision follows Progressive's third-quarter operating EPS, which the firm estimates at $3.58, compared to $2.11 in the same period last year. These figures stand in contrast to CFRA's initial estimate of $2.35 and the consensus view of $3.67.
Progressive's third-quarter performance showcased a 23% rise in premiums, surpassing the forecasted 15%-20% range, and an improved underwriting result, leading to a combined ratio of 89.0% versus the 92.4% from the year prior. The company's production and underwriting trends have been particularly strong, with a 25% growth in written premiums and a 14% increase in policies in force, suggesting Progressive is maintaining its pricing power in the market.
Despite the anticipation of some fourth-quarter hurricane claims, CFRA views these as manageable and believes that Progressive is well-positioned to continue producing profitable growth at double the rate of most of its competitors, justifying the premium valuation of the company's stock.
In other recent news, Progressive Corp has been the focus of several analyst reports. BofA Securities raised its price target on the company to $331 from $319, maintaining a Buy rating. This revision was driven by an expansion in the market's P/E multiple and expectations of Progressive's earnings per share for 2026.
Wells Fargo also increased its price target to $297 from $285, maintaining an Overweight rating, citing strong growth and margin performance. TD Cowen, however, held steady with a Hold rating and a price target of $197.
Progressive recently reported a significant surge in its third-quarter profit, with net income climbing to $2.33 billion. This was largely due to a 15% year-over-year increase in personal insurance policies, totaling 29.3 million. Net premiums written during the quarter saw a 25% jump to $19.46 billion. However, the insurer also incurred $563 million in catastrophe losses due to Hurricane Helena and anticipates nearly $325 million in catastrophe losses due to Hurricane Milton.
These are among the recent developments for Progressive Corp. Other news includes the company's strong operational performance and robust demand for personal auto insurance policies. However, the company also faced challenges with catastrophe losses from hurricanes. Analysts have provided varied outlooks on the company, reflecting the complex factors influencing Progressive's performance.
InvestingPro Insights
Progressive Corp's strong performance, as highlighted in CFRA's analysis, is further supported by real-time data and insights from InvestingPro. The company's market capitalization stands at an impressive $148.03 billion, reflecting its significant presence in the insurance industry. Progressive's revenue growth of 22.67% over the last twelve months aligns with CFRA's observation of a 23% rise in premiums, indicating robust business expansion.
InvestingPro Tips reveal that Progressive has maintained dividend payments for 15 consecutive years, showcasing financial stability. Moreover, the company's high return over the last year and strong performance over the last three months corroborate CFRA's positive outlook. These factors contribute to Progressive trading near its 52-week high, with the stock price at 97.32% of its peak.
The P/E ratio of 18.39 suggests that investors are willing to pay a premium for Progressive's shares, likely due to its strong growth prospects and market position. This valuation is supported by analysts' expectations of continued profitability and net income growth this year.
For readers seeking a deeper understanding of Progressive's financial health and market position, InvestingPro offers 11 additional tips, providing a comprehensive view of the company's prospects.
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