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Prudential Financial (PRU) Up 27.3% in a Year: More Room to Run?

·4 min read

Shares of Prudential Financial, Inc. PRU have gained 27.3% in a year against the industry's decrease of 4.2%. The Zacks S&P 500 composite has rallied 12.4% in the said time frame. With a market capitalization of $42.4 billion, the average volume of shares traded in the last three months was 2.1 million.

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The rally was largely driven by continued business growth, lower expenses and sufficient liquidity.

The multi-line insurer has a decent earnings surprise history. The bottom line beat estimates in each of the last four quarters, the average being 38.03%.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2023 earnings per share is pegged at $13.32, indicating a year-over-year increase of 9.8%. The expected long-term earnings growth rate is pegged at 9%.

The multi-line insurer’s international businesses that consist of Life Planner and Gibraltar Life & Other are likely to gain from continued business growth, lower expenses and higher net investment spread results. Also, higher premiums, policy charges and fee income attributable to the growth of business in force should drive growth in its Life Planner operations.

U.S. businesses should continue to gain from higher net investment spread results, driven by higher income on non-coupon investments, increased variable investment income, higher fee income as well as equity market appreciation.

Prudential Financial looks forward to shift the business mix toward higher growth and less interest rate-sensitive products and businesses in an effort to transform capabilities and cost structure as well as to enhance addressable markets.

Underlying earnings power per share should continue to improve on the back of business growth, the benefits of cost savings program, capital management and market appreciation.

The insurer continues to remain on track to achieve $750 million in savings by the end of 2023. So far, PRU has already achieved $635 million in run-rate cost savings, which exceeded the $500 million target for 2021.

This Zacks Rank #3 (Hold) insurer continues to maintain a solid capital position and adequate sources of funding. The capital position continues to support a AA financial strength rating. The cash and liquid assets were within the $3 billion to $5 billion liquidity target range. Prudential’s other sources of funds include free cash flow from businesses and contingent capital facilities.

Prudential Financial aims to return $11 billion of capital to shareholders between 2021 and the end of 2023 via share repurchases and dividends. As part of this plan, the board has authorized $1.5 billion of share repurchases and a quarterly dividend hike of 4% in the first quarter of 2022, which marked the 14th consecutive annual dividend increase.

Stocks to Consider

Some better-ranked multi-line insurers include Horace Mann Educators HMN, Aegon AEG and CNO Financial Group CNO. While Horace Mann sports a Zacks Rank #1 (Strong Buy), Aegon and CNO Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Horace Mann’s earnings surpassed estimates in each of the last four quarters, the average beat being 22.8%. In the past year, HMN has rallied 6.2%.

The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 8.3% and 11% north, respectively, in the past 30 days.

Aegon’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 75%. In the past year, AEG has rallied 6.4%.

The Zacks Consensus Estimate for Aegon’s 2022 earnings has moved 12.5% north, respectively, in the past 60 days.

The bottom line of CNO Financial surpassed earnings estimates in each of the last four quarters, the average being 25.48%. In the past year, the insurer has rallied 1.7%.

The Zacks Consensus Estimate for CNO Financial’s 2022 and 2023 earnings has moved 2.1% and 2.8% north, respectively, in the past 30 days.


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