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Growth & Income

Estimates have been rising for Prudential Financial, Inc. (PRU - Analyst Report) after the company reported solid fourth quarter results on February 8.

It is a Zacks #2 Rank (Buy).

Analysts project strong earnings growth from Prudential over the next few years, but despite this, shares trade at less than 9x forward earnings.

The company has also been aggressively buying back its stocks and pays a dividend that yields 2.3%.

Company Description

Prudential provides life insurance and asset management services to individuals and institutions. It had assets under management (AUM) of $901 billion at the end of 2011.

The company was founded in 1875 and is headquartered in Newark, New Jersey. It has a market cap of $30 billion.

Fourth Quarter Results

Prudential reported better than expected fourth quarter results on February 8. Earnings per share came in at $1.97, beating the Zacks Consensus Estimate of $1.76. It was a 12% increase over the same quarter in 2010.

Total revenue rose 28% to $10.263 billion, driven by a 44% increase in Premiums.

The company's largest expense - Insurance & Annuity Benefits - rose 36% over the same quarter in 2010. Overall, adjusted operating income increased 11% year-over-year.

Estimates Rising

Analysts revised their estimates higher for Prudential following the strong Q4 beat. This sent the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $7.03, representing 10% growth over 2011 EPS. The 2013 consensus estimate is currently 16% higher at $8.17.

Analysts believe that the company can deliver solid EPS growth over the next few years through its strong product mix, favorable industry tailwinds, and share buybacks.

Returning Value to Shareholders

Speaking of share buybacks, the company bought spent $1.0 billion buying back 19.8 million shares of its stock in the second half of 2011.

It also pays a dividend that yields a solid 2.3%.

Attractive Valuation

Valuation looks attractive with shares trading at just 0.8x book value, below the industry median of 1.1x.

It is also trading at just 8.6x 12-month forward earnings, well below the peer group multiple of 12.6 and its 10-year median of 11.8x.

The Bottom Line

With rising estimates, solid growth projections, a 2.3% yield and attractive valuation, Prudential offers investors attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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