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Why You Should Hold on to Prudential Financial (PRU) Stock

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Prudential Financial, Inc. (PRU - Free Report) is well-poised to gain from higher premiums, solid international presence, higher net investment spread and effective capital deployment.

Earnings Surprise History

Prudential Financial has a decent surprise history, beating earnings estimates in each of the last seven reported quarters.

Zacks Rank & Price Performance

Prudential Financial currently carries a Zacks Rank #3 (Hold). In the past year, the PRU stock has lost 2.5% compared with the industry’s decline of 15%.

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Return on Equity

PRU’s return on equity for the trailing 12 months is 9.3%, up 170 basis points (bps) year over year. This reflects efficiency in utilizing shareholders’ funds.

Business Tailwinds

The Zacks Consensus Estimate for Prudential Financial’s 2023 earnings per share is pegged at $13, indicating an increase of 11.1% from the year-ago reported figure.

Prudential Financial’s international businesses, consisting of Life Planner and Gibraltar Life & Other, are likely to gain from continued business growth, lower expenses and higher net investment spread results. Higher premiums, policy charges and fee income attributable to the growth of business drive growth in Life Planner operations.

U.S. businesses should continue to gain from a higher net investment spread, which includes benefits from variable investment income and rising interest rates. Favorable underwriting, owing to declining COVID-related mortality experience and lower expenses, on the back of cost savings initiatives, should also add to the upside.

Prudential boasts a strong international presence. In the first quarter, PRU continued to focus on expanding product and business capabilities in emerging markets to meet the evolving needs of customers. It launched a new accident and health product in the growing Brazil market and continued to expand the wellness platform across Latin America. PRU has strengthened its presence in Africa with the agreement to acquire a minority interest in Alexander Forbes through its existing partnership with LeapFrog Investments.

This insurer continues to make steady progress toward achieving the cost savings target of $750 million at the end of 2023. In the first quarter of 2022, PRU realized $170 million in cost savings for a total of $680 million of run-rate savings to date since 2019.
 
Prudential's balance sheet provides financial flexibility to execute its transformation strategy and return substantial capital to shareholders. Cash and liquid assets were $3.6 billion and within $3 billion to $5 billion liquidity target range. Other sources of funds include free cash flow from businesses, proceeds from divested businesses and contingent capital facilities.

The multi-line insurer remains committed to return $11 billion of capital to shareholders from 2021 till 2023 via share repurchases and dividends. As part of this program, the board increased dividend by 4% in the first quarter of 2022, which marked the 14th consecutive annual dividend increase. Its current dividend yield of 4.5% is better than the industry average of 2.3%. This makes the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked insurers are HCI Group, Inc. (HCI - Free Report) , MGIC Investment Corporation (MTG - Free Report) and James River Group Holdings, Ltd. (JRVR - Free Report) . While HCI Group sports a Zacks Rank #1 (Strong Buy), MGIC Investment and James River Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% to 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 17.9%.

The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates a year-over-year increase of 280.9% and 75%, respectively.

The Zacks Consensus Estimate for MGIC Investment’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 30 days.

MTG’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.94%. In the past year, MTG stock has lost 5.2%.

The Zacks Consensus Estimate for James River’s 2022 and 2023 earnings per share indicates year-over-year increases of 136% and 13.1%, respectively.

The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 30 days. In the past year, JRVR stock has lost 29.4%.