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Why Is Prudential (PRU) Up 3.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Prudential (PRU - Free Report) . Shares have added about 3.7% in that time frame, outperforming 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 drivers.

Prudential Q1 Earnings Beat, Revenues Miss Estimates

Prudential Financial, Inc.’s first-quarter 2021 operating net income of $4.11 per share beat the Zacks Consensus Estimate by 53.3%. The bottom line also increased 77.1% year over year on higher contributions from Prudential Global Investment Management (PGIM), U.S. and International businesses.

Behind the Headlines

Total revenues of $14.2 billion were up 6.6% year over year due to higher premiums, policy charges and fee income, net investment income, asset management fees, commissions as well as other income. However, the top line missed the Zacks Consensus Estimate by about 9.1%.

Total benefits and expenses of $12.1 billion were up 3.9% year over year for the quarter. This increase in expenses was mainly attributable to higher insurance and annuity benefits as well as general and administrative costs.

Quarterly Segment Update

PGIM reported adjusted operating income of $651 million, which increased more than three-fold year over year. The increase was attributable to a $378-million gain from the sale of ownership in Pramerica SGR. The upside reflects higher asset management fees, driven by an increase in average account values and Other Related Revenue on the back of growth in co- and seed investment income, agency revenues as well as incentive fees, partially offset by greater expenses.

U.S. Businesses’ adjusted operating income was $852 million, up 37.6% from the year-ago quarter. The increase reflects higher net investment spread results, driven by increased variable investment income and net fee income, primarily due to equity market appreciation. It was partially offset by less favorable underwriting results due to COVID-related net mortality experience.

Assurance IQ incurred adjusted operating loss of $39 million, wider than the loss of $23 million in the year-ago quarter. This reflects an 80% increase in revenues that were more than offset by increased expenses to support business growth.

International delivered adjusted operating income of $871 million, up 25.1% from the year-earlier period, attributable to higher net investment spread results, more favorable underwriting results, business growth and greater earnings from joint venture investments.

Corporate and Other Operations incurred adjusted operating loss of $286 million, narrower than $342 million loss a year ago. The improvement reflects lower expenses, higher income from pension and other employee benefit plans as well as reduced interest expense, partially offset by low net investment income.

Share Repurchase Update

Prudential returned capital worth $842 million to shareholders in the first quarter of 2021.

Financial Update

Cash and cash equivalents of $16.1 billion at quarter-end decreased 49.1% from the 2020-end level.

Debt balance totaled $20.6 billion as of Mar 31, 2021, down 9.2% from the 2020-end level.

As of Mar 31, 2021, Prudential’s assets under management increased 12.3% year over year to $1.663 trillion.

Adjusted book value per common share — a measure of the company’s net worth — came in at $100.49 as of Mar 31, 2021, up 0.8% year over year.

Operating return on average equity was 17% for the first quarter, expanding 810 basis points year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Prudential has an average Growth Score of C, however its Momentum Score is doing a bit 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Prudential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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