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Prudential (PRU) Stock Plunges 30.1% in a Year: Here's Why
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Prudential Financial Inc. (PRU - Free Report) continues to be adversely impacted by escalating costs, lower investment income as well as lower return on equity. These, in turn, have been weighing on the company’s overall results.
Shares of this Zacks Rank #5 (Strong Sell) multi line insurer have lost 30.1% in the past year, compared with the industry’s decline of 12.1%.
The company has a poor earnings surprise history. It came up with average trailing four-quarter negative surprise of 0.08%.
The Zacks Consensus Estimate for 2020 earnings per share is pegged at $9.12, indicating a decline of 21.9% from the year-ago reported figure.
Let’s take a detailed look at the factors hurting the stock.
Prudential Financial’s revenues declined 25.6% year over year in the first quarter of 2020 mainly due to lower premiums, net investment income and higher losses. Notably, the Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $54.97 billion, indicating a decline of 5.4% from the year-ago reported figure.
Net investment income, which drives the revenues of the company declined in first-quarter 2020 by 0.3% year over year due to lower invested assets, short-term investments and cash equivalents. Also, the prevailing low interest rate environment is likely to keep investment yields under pressure. Also, the company estimates net investment income to be reduced by $15 million in the second quarter due to difference between new money rates and disposition yields on their investment portfolio.
Prudential Financial has been witnessing escalating expenses owing to increase in general and administrative expenses, policyholders’ benefits, amortization of deferred policy acquisition costs and higher interest credited to policyholders’ account balances. Expenses increased at a two-year CAGR (2017-2019) of 5.95%. Such increase in expenses weigh on the company’s margins.
Additionally, Prudential Financial’s trailing 12-month return on equity of 7.1% is lower than the industry’s 8.3%. This highlights the company’s inability to utilize shareholders’ funds.
The Zacks Consensus Estimate for earnings for the current quarter has been revised 8.9% downward over the past 30 days.
Kemper specializes in property and casualty insurance, life and health insurance products for individuals, families, and small businesses. It beat estimates in each of the trailing four quarters, the average positive surprise being 16.25%.
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. It beat estimates in three of the trailing four quarters, the average positive surprise being 12.51%.
Horace Mann operates as a multiline insurance company in the United States. It underwrites and markets personal lines of property and casualty insurance. It surpassed estimates in two of the last four quarters, with the average positive surprise being 11.03%.
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Prudential (PRU) Stock Plunges 30.1% in a Year: Here's Why
Prudential Financial Inc. (PRU - Free Report) continues to be adversely impacted by escalating costs, lower investment income as well as lower return on equity. These, in turn, have been weighing on the company’s overall results.
Shares of this Zacks Rank #5 (Strong Sell) multi line insurer have lost 30.1% in the past year, compared with the industry’s decline of 12.1%.
The company has a poor earnings surprise history. It came up with average trailing four-quarter negative surprise of 0.08%.
The Zacks Consensus Estimate for 2020 earnings per share is pegged at $9.12, indicating a decline of 21.9% from the year-ago reported figure.
Let’s take a detailed look at the factors hurting the stock.
Prudential Financial’s revenues declined 25.6% year over year in the first quarter of 2020 mainly due to lower premiums, net investment income and higher losses. Notably, the Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $54.97 billion, indicating a decline of 5.4% from the year-ago reported figure.
Net investment income, which drives the revenues of the company declined in first-quarter 2020 by 0.3% year over year due to lower invested assets, short-term investments and cash equivalents. Also, the prevailing low interest rate environment is likely to keep investment yields under pressure. Also, the company estimates net investment income to be reduced by $15 million in the second quarter due to difference between new money rates and disposition yields on their investment portfolio.
Prudential Financial has been witnessing escalating expenses owing to increase in general and administrative expenses, policyholders’ benefits, amortization of deferred policy acquisition costs and higher interest credited to policyholders’ account balances. Expenses increased at a two-year CAGR (2017-2019) of 5.95%. Such increase in expenses weigh on the company’s margins.
Additionally, Prudential Financial’s trailing 12-month return on equity of 7.1% is lower than the industry’s 8.3%. This highlights the company’s inability to utilize shareholders’ funds.
The Zacks Consensus Estimate for earnings for the current quarter has been revised 8.9% downward over the past 30 days.
Stocks to Consider
Some better-ranked stocks in the multi-line insurance sector are Kemper Corporation (KMPR - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Horace Mann Educators Corporation (HMN - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kemper specializes in property and casualty insurance, life and health insurance products for individuals, families, and small businesses. It beat estimates in each of the trailing four quarters, the average positive surprise being 16.25%.
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. It beat estimates in three of the trailing four quarters, the average positive surprise being 12.51%.
Horace Mann operates as a multiline insurance company in the United States. It underwrites and markets personal lines of property and casualty insurance. It surpassed estimates in two of the last four quarters, with the average positive surprise being 11.03%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>