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Reasons Why Investors Should Hold Prudential (PRU) Stock

Zacks Equity Research
·4 min read

Prudential Financial, Inc. PRU has been gaining momentum from favorable underwriting results, higher net investment spread and solid financial position.

The company is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

The company delivered an earnings surprise in three of the last four reported quarters with the average beat being 6.13%.

PGIM, one of its segments, is a top 10 global investment manager that continues to demonstrate the strength and resilience of its multi-manager business model. PGIM’s strong investment performance and diversified global investment capabilities across public and private asset classes, position it favorably to continue to capture flows amid industry-wide dislocation. Its assets under management reached a record level of over $1.4 trillion, up 11% in the third quarter on the back of strong flows, robust investment performance, as well as market appreciation.

Its international businesses are well poised for growth on the back of business growth, lower expenses and more favorable underwriting results, higher earnings from joint venture investments and higher net investment spread.

The company has taken additional steps to expand its cost-savings program. Through the third quarter of this year, it realized approximately $135 million of its $500 million cost savings program. Based on the progress of accelerating the savings realized and creating new ways of working, it expects to generate an incremental $250 million in efficiencies by the end of 2023 to increase the total cost savings program to $750 million.

The multi-line insurer maintains a robust capital position and adequate sources of funding. Its capital position exceeded the AA financial strength targets. Moreover, its liquid assets at the parent company are greater than three times annual fixed charges.

It has substantial sources of funding as well. Its cash and liquid assets at the parent company were $6.1 billion at third-quarter end, including the proceeds from the sale of Prudential of Korea.

The company witnessed double-digit dividend growth supported by strong earnings and cash flow coverage. The company has increased its dividend at a 19-year (2008-2019) CAGR of 19% and currently yields 5.3%, which is better than the industry average of 2%. It has $500 million remaining under its share repurchase program.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $11.88, indicating a rise of 20.9% from the year-earlier reported numbers.

Shares of this Zacks Rank #3 (Hold) company have gained 28.7% in the past six months, compared with the industry’s rise of 26.7%. The company's operational efficiencies, investment in new growth avenues and an effective capital deployment will continue to drive shares in the days ahead.

Stocks to Consider

Some better-ranked stocks from the insurance sector are The Allstate Corporation ALL, Aon plc AON and Kemper Corporation KMPR. While The Allstate sports a Zacks Rank #1 (Strong Buy), Aon and Kemper carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate surpassed bottom-line estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 38.59%, on average.

Aon surpassed bottom-line estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 1.12%, on average.

Kemper surpassed bottom-line estimates in each of the last four quarters. It has a trailing four-quarter earnings surprise of 24.01%, on average.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
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Kemper Corporation (KMPR) : Free Stock Analysis Report
 
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