A month has gone by since the last earnings report for Prudential (PRU - Free Report) . Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prudential due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Prudential Q2 Earnings Beat Estimates, Decline Y/Y
Prudential’s second-quarter 2020 operating net income of $1.85 per share beat the Zacks Consensus Estimate by 7.6%. However, the bottom line declined 41.1% year over year owing to lower contributions from U.S. Individual Solutions, U.S. Workplace Solutions and International Businesses.
Total revenues of $13.1 billion plunged 7.3% year over year due to lower premiums, net investment income, and decrease in asset management fees, commissions and other income. However, the decline was partly mitigated by higher policy charges and fee income. Moreover, the top line outpaced the Zacks Consensus Estimate by 1.1%.
Total benefits and expenses of $12.1 billion inched up 0.6% year over year in the quarter. This increase in expenses was mainly due to higher interest expense, and general and administrative expenses.
Quarterly Segment Update
Prudential Global Investment Management (PGIM) reported adjusted operating income of $324 million, which improved 22.7% year over year. The upside can be attributed to improved Other Related revenues courtesy of increased strategic investment earnings, lower expenses and higher asset management fees. PGIM assets under management improved 9% year over year to $1.394 trillion at the end of the reported quarter, driven by market appreciation and public fixed income inflows, partly offset by public equity outflows.
U.S. Workplace Solutions’ adjusted operating income was $286 million, which plunged 47.8% from the year-ago quarter owing to lower contribution from Retirement and Group Insurance business.
U.S. Individual Solutions reported adjusted operating income of $185 million, down 43.4% mainly due to lower contribution from Individual Annuities, partly offset by lower loss reported in Individual Life.
International delivered adjusted operating income of $693 million, down 12.3% from the year-earlier period, due to lower net investment spread results and increased expenses. These were partially offset by business growth, higher earnings from joint venture investments due to market performance and more favorable underwriting results.
Corporate and Other incurred adjusted operating loss of $541 million, wider than loss of $335 million reported a year ago. The deterioration reflects increased expenses and lower net investment income, partly mitigated by higher income from pension and other employee benefit plans.
Cash and cash equivalents of $21.1 billion at quarter end increased 29.5% from 2019 end level. Debt balance totaled $21.3 billion as of Jun 30, 2020, up 3.5% from the level as of 2019 end. As of Jun 30, 2020, Prudential Financial’s assets under management increased 7.2% year over year to $1.6 trillion.
Adjusted book value per common share, a measure of the company’s net worth, came in at $92.07 as of Jun 30, 2020, down 5.2% year over year.
Operating return on average equity was 7.8% in the second quarter, contracting 490 basis points year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
Currently, Prudential has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Prudential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.