Multi-decade-high inflation, geopolitical tensions, prolonged supply chain disruptions, and monetary policy tightening by central banks have weighed on equity markets of late. Consequently, the benchmark S&P 500 index has declined 3% year-to-date, while the tech-heavy Nasdaq Composite index has retreated 22.4% over this period.
In addition, Morgan Stanley strategists expect the S&P 500 index to decline to around 3,400 by mid-August, roughly 18% below current levels. Also, the Federal Reserve is expected to raise interest rates by another 50 basis points in the near term. Given the current economic slowdown and macroeconomic backdrop, analysts expect the U.S. economy to enter recession territory soon,
Thus, Wall Street analysts expect Progressive Corporation (PGR), Dutch Bros Inc. (BROS), and UWM Holdings Corporation (UWMC) to decline further in price in the near term.
The Progressive Corporation (PGR)
PGR in Mayfield Village, Ohio, is an insurance company that operates through three segments: Personal Lines; Commercial Lines; and Property. The company sells its products through independent insurance agencies, as well as directly on the internet through mobile devices and over the phone.
On May 18, PGR’s board of directors renewed its authorization to repurchase up to $25 million of its common shares. However, this indicates substantial cash expense in the near term, which might limit its organic growth prospects.
On March 2, PGR raised approximately $1.50 billion through senior notes, offered in three tranches. The transaction is expected to increase the company’s total debt and interest burden.
In its fiscal first quarter (ended March 31, 2022), PGR’s total pretax net realized losses on securities was $445.30 million, compared to $585.30 million in gains reported in the prior year quarter. Its net income fell 79% year-over-year to $313.90 million. In comparison, its EPS came in at $0.52, down by 79% year-over-year.
For its fiscal second quarter (ending June 30, 2022), PGR’s EPS and revenue are expected to increase 36.9% and 8.3%, respectively, year-over-year to $0.98 and $12.43 billion. However, the company missed consensus EPS estimates in each of the trailing four quarters.
The shares of PGR have declined marginally over the past year to close Friday’s trading session at $119.11. Among 12 analysts that rated PGR, three rated it Buy, while five rated it Hold, and four rated it Sell. The 12-month median price target of $111.67 indicates a 6.3% potential downside from its last closing price of $119.11. The price targets range from a low of $90.00 to a high of $138.00.
PGR's POWR Ratings are consistent with this bleak outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
PGR has a grade of D for Growth and Value. Within the Insurance - Property & Casualty industry, it is ranked #28 of 55 stocks. To see PGR's POWR Ratings for Momentum, Stability, Quality, and Sentiment, click here.
Dutch Bros Inc. (BROS)
BROS in Grants Pass, Ore., is an operator and franchisor of drive-thru shops. It offers hot and cold espresso-based beverages and cold brew coffee products, as well as Blue Rebel energy drinks, tea, lemonade, smoothies, and other beverages through company-operated shops and online channels.
BROS went public through a traditional IPO listing on Sept.15, 2021. It raised approximately $484 million, making it one of the largest IPOs in Oregon’s history.
During its fiscal first quarter (ended March 31, 2022), BRO’s adjusted EBITDA decreased 48.3% year-over-year to $9.66 million. Its loss from operations widened 283.5% from its year-ago value to $14.23 million, while its net loss worsened 237.6% from the same period last year to $16.28 million.
A $0.10 consensus EPS estimate for its fiscal third quarter (ending Sept. 30, 2022) represents a 56.2% decline year-over-year.
Shares of BROS have fallen 18.1% in price year-to-date. Among the nine Wall Street analysts that rated BROS, seven rated it Buy, while two rated it Hold. The 12-month median price target of $38.38 indicates an 8% potential downside from Friday’s closing price of $41.71. The price targets range from a low of $25.00 to a high of $64.00.
BROS' POWR Ratings reflect its poor prospects. The company has an overall D rating. Which equates to Sell in our proprietary rating system.
BROS has a D grade for Stability and an F grade for Sentiment. It is ranked #41 of 44 stocks in the Restaurants industry. To see additional POWR Ratings (Growth, Value, Momentum, and Quality) for BROS, click here.
UWM Holdings Corporation (UWMC)
UWMC in Pontiac, Mich., is engaged in selling and servicing residential mortgage loans in the United States. The company originates conforming and government loans, primarily, through the wholesale channel. It partners with mortgage brokers, correspondents, and financial institutions.
During its fiscal 2022 first quarter (ended March 31, 2022), UWMC’s net revenues decreased 30.9% year-over-year to $821.79 million. Its adjusted EBITDA fell 82% from its year-ago value to $128.41 million. Its net income declined 47.3% from the same period last year to $453.29 million, while its EPS came in at $0.22, representing a 33.3% decrease year-over-year.
Analysts expect UWMC’s EPS and revenue to decrease 4.9% and 12.7%. respectively, year-over-year to $0.07 and $423.01 million in its fiscal second quarter (ending June 30, 2022).
The stock has declined 55% in price over the past year to close the last trading session at $3.99. Among 10 analysts that rated UWMC, one rated it Buy, while eight rated it Hold, and one rated it Sell. The 12-month median price target of $3.91 indicates a 2% potential downside from the last closing price of $3.99. The price targets range from a low of $3.00 to a high of $5.00.
UWMC's POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which translates to Sell in our proprietary rating system. It has a D grade for Growth and Value and an F grade for Stability and Sentiment. It is ranked #49 of 49 stocks in the D-rated Consumer Financial Services industry. Click here to see UWMC's POWR Ratings for Quality and Momentum.
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PGR shares were trading at $120.15 per share on Monday afternoon, up $1.04 (+0.87%). Year-to-date, PGR has gained 17.26%, versus a -12.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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