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Here's Why You Should Hold Prudential Financial (PRU) Stock

Prudential Financial, Inc. PRU remains well-poised for growth, driven by business improvement, lower expenses and higher net investment spread results, cost saving initiatives and solid financial position.

Zacks Rank & Price Performance

Prudential Financial currently carries a Zacks Rank #3 (Hold). In the past year, the PRU stock has lost 14.5% compared with the industry’s decline of 1%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Return on Equity

PRU’s return on equity for the trailing 12 months is 213.3%, up 370 basis points year over year. This reflects efficiency in utilizing shareholders’ funds.

Optimistic Growth Projections

The Zacks Consensus Estimate for Prudential Financial’s 2023 and 2024 earnings per share is pegged at $12.20 and $12.71, indicating respective year-over-year increases of 28.9% and 4.2%.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 2.9% and 0.2% north, respectively, in the past 30 days, reflecting analyst’s optimism.

Business Tailwinds

The multi-line insurer’s international businesses remain well-poised to gain from continued business growth, higher net investment spread, lower expenses and higher earnings from joint venture investments, as well as favorable underwriting results.

U.S. businesses should continue to gain from a higher net investment spread, which includes benefits from variable investment income, lower expenses on the back of cost-saving initiatives and rising interest rates. The U.S. business continues to shift toward higher growth and less market-sensitive products and markets, enhance customer experience, while reducing costs and further expand addressable markets.

Prudential Financial continues to invest in acquisitions and partnerships that enable it to grow in emerging markets. In the third quarter of 2022, the company acquired a 33% minority interest in Alexander Forbes Group Holdings Limited in South Africa. The investment is consistent with PRU’s strategic focus internationally on higher-growth emerging markets. The deal furthers the partnership’s specific objective to identify and make strategic investments in high-quality financial service companies in selected Africa geographies.

Prudential Financial executed a number of strategic initiatives to reduce market sensitivity and increase growth potential, including the expansion of cost-saving program. PRU achieved $820 million of annual run rate cost savings, exceeding the target of $750 million a year ahead of schedule. It leverages new systems and technologies to enhance digital underwriting, claims and fund processing capabilities, thus improving efficiency.

Prudential Financial’s solid financial position provides it with the flexibility to execute its transformation and invest in the long-term growth of businesses.

In February 2023, the board authorized a 4% dividend increase beginning in the first quarter, which represents 15th consecutive annual dividend increase. Its capital deployment is supported by its sturdy balance sheet strength that included highly liquid assets of $4.5 billion at the end of the fourth quarter and a capital position that continues to support an AA financial strength rating.

Stocks to Consider

Some better-ranked stocks from the insurance industry are James River Group Holdings, Ltd. JRVR, Old Republic International Corporation ORI and Lemonade, Inc. LMND. James River and Old Republic International currently sport a Zacks Rank #1 (Strong Buy), and Lemonade carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

James River’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 17.20%. In the past year, JRVR has gained 10%.

The Zacks Consensus Estimate for JRVR’s 2023 and 2024 earnings implies respective year-over-year increases of 16.2% and 13.9%.

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Old Republic International’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 21.89%. In the past year, ORI has lost 4%.

The Zacks Consensus Estimate for ORI’s 2023 and 2024 earnings has moved 7.3% and 6.8% north, respectively, in the past 60 days.

Lemonade’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 13.57%. In the past year, LMND has lost 26.8%.

The Zacks Consensus Estimate for LMND’s 2023 and 2024 earnings implies respective year-over-year increases of 6.5% and 8.5%.

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

Prudential Financial, Inc. (PRU) : Free Stock Analysis Report

Old Republic International Corporation (ORI) : Free Stock Analysis Report

James River Group Holdings, Ltd. (JRVR) : Free Stock Analysis Report

Lemonade, Inc. (LMND) : Free Stock Analysis Report

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Zacks Investment Research