On Monday, BMO Capital adjusted its price target for shares of Progressive Corp. (NYSE:PGR), a major insurance company, to $267.00, down from the previous $273.00. Despite the reduction, the firm maintained its Outperform rating on the stock.
The revision followed Progressive's November performance, which the analyst described as a rebound from the previous month's core margin miss. The improvement was attributed to better core loss ratios and downward adjustments to estimated losses from Hurricanes Helene and Milton.
Progressive's auto policies-in-force (PIF) growth slowed to 1.4% month-over-month, yet this was still ahead of BMO Capital's estimate of 0.9% and the consensus. This deceleration didn't deter the analyst from maintaining a positive outlook on the company's stock.
The analyst's revisions to Progressive's earnings per share (EPS) estimates for the years 2024, 2025, and 2026 reflect a mixed picture. While the 2024 EPS estimate increased by 10%, the 2026 estimate saw a 2% reduction.
The adjustments to the EPS estimates were made based on several factors, including weaker pricing expectations, which were partially compensated by stronger policy count growth in the near term. The 2024 EPS estimate specifically was raised due to the company's robust November performance, coupled with expectations of stronger December margins and faster PIF growth.
The price target was set with consideration of a "normalized" EPS that assumes Progressive's historical average 92.5% combined ratio. However, the actual EPS estimate is approximately 10% higher, with a lower and more favorable 91.2% combined ratio, compared to the consensus of 91.3%. The new price target represents a 3% decrease from the previous target.
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