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What's in Store for Prudential (PRU) This Earnings Season?

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Prudential Financial, Inc. PRU is slated to report fourth-quarter 2020 results on Feb 4, after market close. The company delivered an earnings surprise of 19.3% in the last reported quarter.

Factors to Consider

Higher assets under management, differentiated multi-channel distribution model, lower travel and entertainment expenses are likely to have aided Prudential’s fourth-quarter performance.

Growth in Japan business, leadership position in Japan life insurance market and differentiated multi-channel distribution model, focus on high-growth markets, customer demand for protection and retirement products, and its businesses in Brazil, Chile, Indonesia, India, China and Africa are likely to have contributed to the performance of the International Insurance segment. In Japan, its Life Planner model benefited from balance sheet strength.

The company expects lower level of sales in the fourth quarter in the Life Planner and Gibraltar Life operations.

The company expects to recognize additional cost savings and gain from efficient workforce with the use of advanced technology.

The retirement business is likely to have benefited from higher net investment spread and higher reserve gains.

The company estimates net investment income to be reduced by $15 million in the to-be-reported quarter due to the difference between new money rates and disposition yields of investment portfolio.

In Group Insurance business, the company expects COVID-19 to contribute to higher levels of mortality that may result in increased life insurance claims in the to-be-reported quarter.

PGIM is likely to have benefited from higher assets under management and other related revenues.

Assets under management are likely to have benefited from fixed income inflows, robust investment performance, as well as market appreciation.

The company expects individual annuities and individual life sales to decline in the to-be-reported quarter due to pricing actions.

The company expects net operating costs to be $5 million lower in the fourth quarter due to COVID-19.

It expects expenses and other items to be $70 million higher in the fourth quarter, primarily due to seasonal expenses and implementation costs.

Prudential anticipates incremental operating costs of $5 million due to the pandemic in the fourth quarter, including additional operating costs of $25 million. Travel and entertainment expenses are expected to have declined.

Prudential estimates earnings per share to be $2.48 in the fourth quarter. The Zacks Consensus Estimate for earnings per share is pegged at $2.50, indicating 7.3% increase from the year-ago period reported figure. The Zacks Consensus Estimate for revenues is pegged at $13.9 billion, indicating a decrease of about 19.9% from the year-ago reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Prudential this time around. This is because the stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case as you can see below.

Earnings ESP: Prudential has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.50. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Prudential Financial, Inc. Price and EPS Surprise

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

Stocks to Consider

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

Cigna Corporation (CI - Free Report) has an Earnings ESP of +1.96% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

American International Group, Inc. AIG has an Earnings ESP of +0.85% and a Zacks Rank #3.

Trean Insurance Group, Inc. (TIG - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank of 3.

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