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What Awaits Prudential Financial (PRU) This Earnings Season?

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Prudential Financial, Inc. (PRU - Free Report) is slated to report second-quarter 2020 results on Aug 4, after market close. The company delivered a negative earnings surprise of 18.31% in the last reported quarter.

Factors to Consider

Prudential’s second-quarter results are likely to reflect the re-pricing of products, shift toward lower risk and less capital-intensive products, growth in asset-based businesses, solid international operations with focus on directing earnings mix to higher-growth markets and deeper reach in the pension risk transfer market.

Growth in Japan business, leadership position in Japan life insurance market and businesses in Brazil, Chile, Indonesia, India, China and Africa are likely to have contributed to the performance of the International Insurance segment.

The retirement business is expected to have generated improved risk-adjusted returns, specifically with less competition, improved risk profile and leadership in the pension risk transfer business. Given the pandemic, the company expects an impact on funding levels of pension plans, resulting in lower pension risk transfer transactions.

U.S. Financial Wellness is likely to have benefited from advice, investment, and retirement income and protection solutions, thus aiding full-service retirement plan sales and Group Insurance sales.

PGIM is likely to have benefited from a significant pool of assets and a strong balance sheet though the company estimates lower transaction volumes and a slowdown in client activity to have dragged down sales.

As a result of pricing actions, product pivots and disruptions in distribution due to COVID-19, the company estimates sales of individual annuities and Individual Life to have declined.

Prudential estimates second-quarter variable investment income to be $150 million lower than in the first quarter, This may be attributed to lower returns from private equity investments resulting from the decline in values in the first quarter, reported on a one-quarter lag in the second quarter.    

The company estimates net investment income to be lower by $15 million in the second quarter, reflecting the difference between new money rates and disposition yields on investment portfolio.

The company expects lower seasonal expenses, partially offset by higher implementation costs, to result in a net benefit of $50 million in the second quarter. However, in relation to the pandemic, the company expects to incur costs of $114 million in the second quarter.

Normalization of PGIM's other related revenues in Chilean joint venture income is likely to be partially offset by the divested Prudential of Korea business and result in $45 million favorable impact on second-quarter results as estimated by the company.

Prudential estimates second-quarter earnings per share to be $1.53 in the second quarter. The Zacks Consensus Estimate for earnings per share is pegged at $1.72, indicating 45.3% decrease from the year-ago period reported figure. The Zacks Consensus Estimate for revenues is pegged at nearly $13 billion, indicating a decrease of 8.3% from the year-ago reported figure.

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial, Inc. price-eps-surprise | Prudential Financial, Inc. Quote

What the Zacks Model Says

Our proven model predicts an earnings beat for Prudential this time around. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Prudential has an Earnings ESP of +0.73%. This is because the Most Accurate Estimate of $1.73 is pegged higher than the Zacks Consensus Estimate of $1.72. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Prudential currently carries a Zacks Rank of 3.

Other Stocks to Consider

Some other insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

American Financial Group (AFG - Free Report) has an Earnings ESP of +21.45% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

MetLife (MET - Free Report) has an Earnings ESP of +2.51% and a Zacks Rank #3.

Allstate Corporation (ALL - Free Report) has an Earnings ESP of +11.10% and a Zacks Rank of 3.

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