Cyclical Ceiling In Sight? BofA Turns Cautious On Progressive During Macro Shifts

BofA Securities analyst Joshua Shanker downgraded Progressive Corp PGR from Buy to Neutral, lowering the price forecast from $300 to $287.

Shanker noted that while investors have recently shifted into Progressive as a “defensive” play amid recession concerns and new U.S. tariffs, it’s important to recognize that the company may currently be experiencing a cyclical “margin peak.”

Although auto insurance is inherently a cyclical business, Progressive has benefited from its defensive positioning in the market.

However, earnings growth is expected to “decelerate” in 2026, even though the analyst’s forecasts remain higher than consensus, albeit no longer the most optimistic among peers.

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Shanker’s earnings per share forecasts for Progressive stand at $18.35, $18.80 and $20.40 for 2025 through 2027, respectively — each representing a significant premium of 18% to 21% above current consensus estimates.

While acknowledging that it may seem counterintuitive to consider a downgrade under such optimistic projections, the analyst indicated that there are underlying reasons that justify a more cautious stance.

The analyst pointed out that Progressive has achieved a 15% compound annual growth rate in revenue over the past decade through 2024, primarily through organic means, with minimal changes to its share count. The company’s small acquisitions, such as ARX and Protective, were completed using cash rather than equity.

Additionally, operating earnings per share have grown at a 22% annual rate over the same period, well above the typical growth seen across the insurance sector.

The analyst acknowledged tariffs might negatively impact margins more than anticipated, similar to how inflation in used cars and parts during 2021–2022 drove up loss costs for auto insurers.

Shanker does not see this as a major factor in valuing Progressive.

Emphasizing the cyclical nature of the business, the analyst suggested that while periods of over- and under-earning are inevitable, the long-term growth trajectory remains the most important consideration.

PGR Price Action: Progressive shares closed down 10.23% at $257.64 on Friday.

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