UPDATE: Progressive Corp. (PGR) PT Raised to $126 at BofA Securities on Price Increases in 2022
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BofA Securities analyst Joshua Shanker raised the price target on Progressive Corp. (NYSE: PGR) to $126.00 (from $123.00) despite cutting EPS on material margin erosion in April 2021 and May 2021. Why the PT increase on decreased EPS? The analyst raised the expectation for low-single-digit rate increases in 2022 to mid-single-digit which will likely boost 2023 results.
The analyst reiterated a Buy rating, stating "While increased vehicle miles traveled and traffic may be a factor in the recent margin erosion, we believe rising costs of used cars and parts are likely a greater factor and have less of a likelihood of having been expected in early 2021 pricing industrywide. While we still find the magnitude of deterioration in Progressive’s recent results difficult to model conceptually, the direction is clear, and we expect competitors to face similar headwinds in 2Q21 and 2H21. Progressive numbers may be identifying the trend a little earlier than peers similar to Allstate’s experience in 4Q14/1Q15. We expect a notably higher priced market for auto insurance in 2022, with rate changes fully earning through in 2023".
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