A month has gone by since the last earnings report for Prudential (PRU). Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prudential due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Prudential Q3 Earnings Surpass, Revenues Fall Y/Y
Prudential Financial, Inc.reported third-quarter 2023 adjusted operating income of $3.44 per share, which beat the Zacks Consensus Estimate by 8.9%. Moreover, the bottom line rose 45% year over year.
Total revenues of $10.1 billion decreased 52% year over year and missed the Zacks Consensus Estimate by 21.5%. The decline in revenues was due to lower premiums, policy charges and fee income, asset management fees, commissions and other income.
Prudential Financial's third-quarter results reflect lower expenses and higher net investment spread results, partially offset by lower agency and seed and co-investment income and a decline in income from pension as well as other employee benefit plans.
Total benefits and expenses amounted to $8.5 billion, which declined 57.2% year over year in the third quarter. This decrease was due to lower insurance and annuity benefits and amortization of acquisition costs. The figure was lower than our estimate of $11.2 billion.
Quarterly Segment Update
Prudential Global Investment Management’s (PGIM) adjusted operating income of $211 million in the reported quarter decreased 3.6% year over year. This decrease primarily reflects lower other related revenues, primarily due to lower agency and seed and co-investment income and higher expenses. The figure was higher than our estimate of $198.8 million.
PGIM assets under management of $1.219 trillion increased 1% year over year. The increase was due to equity market appreciation and spread compression, partially offset by net outflows and the impact of higher interest rates.
The U.S. Businesses delivered an adjusted operating income of $1.088 billion, which increased 77% year over year. The figure was higher than our estimate of $985.9 million. This increase primarily reflects higher net investment spread results and lower expenses, partially offset by lower net fee income.
International Businesses adjusted operating income increased 8.4% year over year to $811 million in the third quarter. The figure was lower than our estimate of $816 million. This increase primarily reflects higher net investment spread results.
Corporate and Other incurred an adjusted operating loss of $504 million, wider than a loss of $415 million reported a year ago. The figure was higher than our estimate of a loss of $459.3 million. This higher loss primarily reflects higher expenses, less favorable foreign exchange rate impacts and lower income from pension and other employee benefit plans. It was partially offset by higher net investment income and lower debt interest costs.
Prudential Financial managed to return capital to its shareholders in the form of share repurchases worth $250 million and dividends worth $461 million in the third quarter.
Prudential Financial exited the third quarter with cash and cash equivalents of $16.9 billion, which decreased 16% from 2022-end.
Total debt balance of $19.5 billion decreased 5.7% from 2022-end.
As of Sep 30, 2023, Prudential Financial’s assets under management and administration increased 2.5% year over year to $1.5 trillion.
Adjusted book value per common share, a measure of the company’s net worth, was $94.19, which decreased 2.3% year over year.
Operating return on average equity was 14.5% in the second quarter, which improved 470 basis points year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -7.63% due to these changes.
At this time, Prudential has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Prudential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Prudential is part of the Zacks Insurance - Multi line industry. Over the past month, The Hartford (HIG), a stock from the same industry, has gained 6.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
The Hartford reported revenues of $4.21 billion in the last reported quarter, representing a year-over-year change of +10%. EPS of $2.29 for the same period compares with $1.44 a year ago.
The Hartford is expected to post earnings of $2.29 per share for the current quarter, representing a year-over-year change of -0.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -1%.
The Hartford has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report