Market Overview

Citi Downgrades Progressive To Sell

Share:
Citi Downgrades Progressive To Sell

Citi has downgraded Progressive Corp (NYSE: PGR) to Sell from Neutral, saying that consensus expectations for the auto insurer is "too optimistic" amid potential deterioration in margins.

"It's well understood that Progressive is going through a growth spurt, and as competitors such as Allstate, Geico and others re-price, top line growth will accelerate at Progressive. What isn't well understood is that margins should deteriorate materially early on, as Progressive books new business at a combined ratio of around 129%," analyst James Naklicki wrote in a note.

Naklicki highlighted that the market seems to be assuming about a 1 point deterioration in underlying margins over the balance of the year, which may not be enough.

"As such, we assume EPS of $1.15 per share over the final 8 months of the year, a 9-10% decline, and expect the stock to grind downward as consensus moves lower," Naklicki noted.

The analyst expects the total 2016 combined ratio to come in closer to 95 percent versus 94.4 percent consensus. He also cut his 2016 EPS view by $0.20, to $1.65, well below consensus' $1.83.

However, Naklicki sees an improvement in profitability in 2017 as the underlying margins should begin to improve, as new members are seasoned, and Progressives assumes a lower loss ratio on the policyholders.

The analyst also cut the price target on the stock to $31 from $36.

At time of writing, shares of Progressive fell 0.90 percent to $33.10.

Latest Ratings for PGR

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Nov 2020BarclaysInitiates Coverage OnUnderweight
Oct 2020Raymond JamesMaintainsStrong Buy

View More Analyst Ratings for PGR
View the Latest Analyst Ratings

 

Related Articles (PGR)

View Comments and Join the Discussion!

Posted-In: Citi James NaklickiAnalyst Color Downgrades Price Target Analyst Ratings

Latest Ratings

StockFirmActionPT
CAMTStifelInitiates Coverage On19.0
ELMDNorthland Capital MarketsInitiates Coverage On15.0
DKNGUBSInitiates Coverage On52.0
DIODTruist SecuritiesInitiates Coverage On84.0
TGTArgus ResearchUpgrades205.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com