Progressive 3Q Profit Soars 82%; Wells Fargo Sticks To Hold

Progressive Corp.’s 3Q EPS jumped 82% to $2.59 year-over-year, mainly driven by double-digit growth in net premiums. The insurance company’s quarterly earnings also came way higher than analysts’ expectations of $1.72.

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Progressive’s (PGR) net premiums written grew 14% to $11 billion in the third quarter year-on-year. During the same period, net premiums earned increased 11% to approximately $10 billion but fell short of the Street consensus of $10.9 billion.

Progressive recorded a nearly eight-fold increase in its 3Q net realized gains on securities, which reached $532.6 million. The combined ratio, which reflects the percentage of premiums paid out as claims and expenses, contracted 410 basis points from the prior-year quarter to 87.8. (See PGR stock analysis on TipRanks).

Following quarterly results, Wells Fargo analyst Elyse Greenspan said that the upside in Progressive’s 3Q EPS “reflects a better underlying loss ratio, which more than offset lower investment income and higher catastrophe losses than we had expected.” However, Greenspan reiterated a Hold rating and a price target of $96 (3.7% downside potential), saying that the stock is “fairly valued at current levels.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 6 Buys, 4 Holds and 1 Sell. With shares up nearly 38% year-to-date, the average price target of $97.09 implies downside potential of 2.6% to current level.