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Here's Why You Should Hold Prudential (PRU) Stock For Now

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Prudential Financial, Inc. (PRU - Free Report) has been gaining momentum, given the company's business growth, higher net investment spread, and cost-saving initiatives.

Growth Projections

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $13.14, indicating year-over-year increase of 28.7%.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 0.1% and 0.07% north, respectively in the past seven days. This should instill investors' confidence in the stock.

Earnings Surprise History

Prudential Financial has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 24.36%.

Zacks Rank & Price Performance

Prudential Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 57.4% compared with the industry’s increase of 30.2%.

Zacks Investment Research
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Business Tailwinds

The multi-line insurer’s international businesses are well poised for growth on the back of business growth, higher net investment spread, more favorable underwriting results as well as higher earnings from a Chilean pension joint venture.

U.S. businesses should continue to benefit from higher variable investment income and equity market appreciation.

Prudential recently introduced an indexed variable annuity product named FlexGuard Income that forms part of Prudential’s U.S. Individual Solutions portfolio. Through FlexGuard, the company rolls out individual variable and fixed annuity products for U.S. consumers with an intensified focus on developing unique product design capabilities and devising risk management strategies.

PGIM's asset management fees should gain from market appreciation and continued positive third-party net flows.

The company has taken cost-saving initiatives to produce better customer and employee experiences as well as enhance competitiveness of its businesses. It intends to deliver $750 million in cost savings by the end of 2023, $400 million of which were targeted for 2021.

Furthermore, it remains focused on reallocating $5 billion to $10 billion of capital by pursuing programmatic acquisitions to grow in asset management and in international emerging markets. It continues to invest in other businesses to expand addressable market and improve expense and capital efficiency.

It expects expenses and other items to be around $500 million lower in the second quarter, owing to favorable items in the first quarter, including gain from the sale of PGIM's joint venture in Italy and seasonality.

Prudential Financial continued to maintain a robust capital position that supports a AA financial strength rating, and has substantial sources of funding. Its cash and liquid assets were $5.4 billion, which is greater than three times annual fixed charges. Its other sources of funds include free cash flow from businesses, which is about 65% of earnings and about two times of dividend and other continued capital facilities.

In the first quarter, the company hiked dividend by 5% that represented a 5% yield on adjusted book value. It currently yields 4.6%, which is better than the industry average of 2.2%.

In May 2021, the company increased share repurchase authorization to $500 million, aggregating the share repurchase authorization for 2021 to $2 billion. The insurer intended to repurchase these additional shares in the second quarter. Also, it expects to return $10.5 billion to shareholders through 2023.

Stocks to Consider

Some better-ranked stocks in the insurance sector include MetLife, Inc. (MET - Free Report) , Horace Mann Educators Corporation (HMN - Free Report) and Fidelity National Financial (FNF - 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.

MetLife surpassed estimates in three of the last four quarters, the average beat being 18.16%.

Horace Mann Educators surpassed estimates in each of the last four quarters, the average beat being 33.43%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, the average being 38.65%.

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