Progressive (PGR) Stock Downgraded at Credit Suisse

Credit Suisse downgrades Progressive (PGR) to 'underperform' from 'neutral' and raises its price target for the insurance company to $29 from $28.
By Lindsay Ingram ,

NEW YORK (TheStreet) -- Credit Suisse downgraded Progressive Corp. (PGR) - Get Report to "underperform" from "neutral" on Friday, and raised its price target for the insurance company to $29 from $28.

Shares of Progressive closed at $32.38 on Thursday.

The analyst firm lowered its 2015 EPS estimates for Progressive to $1.96 a share from $1.98 a share. Credit Suisse also lowered its 2016 and 2016 EPS estimates for the company to $1.94 and $2.11 a share from $2.05 and $2.19 a share, respectively.

"The release of the company's 3Q 10Q pointed to frequency accelerating from 1-2% in 1H15 to 5-6% in 3Q and indicated that the reason we didn't see more deterioration of accident year margins during the third quarter was an unusually benign severity trend," Credit Suisse analysts wrote. "On normalized severity, PGR's AY loss ratio would have shown more significant deterioration."

Credit Suisse analysts added that they expect accident year margin deterioration to accelerate in the next few quarters, and Progressive's results to look more like Allstate (ALL) and other peers, which have been negatively impacted by frequency.

Separately, TheStreet Ratings team rates PROGRESSIVE CORP-OHIO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate PROGRESSIVE CORP-OHIO (PGR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 13.1%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, PGR's share price has jumped by 29.98%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PGR should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market, PROGRESSIVE CORP-OHIO's return on equity exceeds that of both the industry average and the S&P 500.
  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Insurance industry average. The net income has decreased by 6.0% when compared to the same quarter one year ago, dropping from $296.10 million to $278.30 million.
  • You can view the full analysis from the report here: PGR

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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