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Why You Should Hold Onto Prudential Financial (PRU) Stock?

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Prudential Financial, Inc. (PRU - Free Report) has successfully delivered to evolving demands and expectations of clients for years, thereby building a solid product and service portfolio in the process. Keeping its reputation intact, the company continues to maintain this momentum to be able to emerge stronger in the future.

The Multi line insurer will continue to benefit from its reach and an in-depth expertise in the pension risk transfer (PRT) business. The company is also on track to establish a leadership position in the potentially strong PRT market, suitable to mobilize the insurance company’s skills in the management of group annuity.

Interestingly, the company arrived at a decision to realign U.S. businesses to position it better to leverage business mix and capture the long-term growth opportunities within and across domestic businesses.

The company’s international operations too have placed it well for long-term growth. It is expected to gain from the AFP Habitat buyout, completed in the first quarter of 2016. The transaction, expanding its international footprint, is estimated to result in a stable rise, steady earnings and an adequate cash flow generation. Therefore, the organization remains focused on diversifying its activities to enable it to accelerate overall growth and keep up the streak in the near term as well.

This Zacks Rank #3 (Hold) Multi line insurer has prosperously generated investors’ value by implementing some shareholder-friendly measures such as, dividend payments and share repurchases, over time. It has been approved of to buy back worth $1.25 billion shares in 2017. The company remains committed toward maintaining a solid capital and liquidity position, thus protecting itself from market volatility.

Shares of Prudential Financial have surged 32.84% in a year’s time, outperforming the industry’s rally of 28.30%. We expect the company’s sustained operational performance, improving asset under management and a robust capital position to drive the stock higher shortly.



However, an unfavorable currency impact and regulatory control remain headwinds. In addition, rising expenses have been spoilers for the insurer and this does not expect a turnaround anytime soon.

Nonetheless, Prudential Financial valuation is attractive at present as the stock is currently trading at a price to book multiple of 0.90 over a year’s period, a whopping 33.3% discount to the industry average of 1.35.

The company has a trailing 12-month return on equity (ROE) of 9.0%, higher than the industry average of 7.7%. Also, the company’s expected long-term earnings growth is pegged at a decent 8.50%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are First American Corporation (FAF - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Argo Group International Holdings, Ltd. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 First American Corporation provides financial services. The company delivered positive surprises in all the last four quarters with an average beat of 12.64%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

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