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Prudential (PRU) Down 9.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Prudential (PRU - Free Report) . Shares have lost about 9.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Prudential due for a breakout? 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 Financial Q4 Earnings Miss, Decrease Y/Y

Prudential Financial, Inc. reported fourth-quarter 2022 adjusted operating income of $2.42 per share, which missed the Zacks Consensus Estimate by 5.8%. The bottom line declined 23.9% year over year. Prudential Financial's results reflect poor performance across most of the segments, lower premiums and net investment income, offset by lower expenses.

Operational Update

Total revenues of $12.6 billion declined 7.9% year over year and missed the Zacks Consensus Estimate by 1.1%. The fall in revenues was due to lower premiums and reduced asset management fees, commissions and other income, decreased policy charges and fee income and net investment income. The figure was higher than our estimate of $12.3 billion.

Total benefits and expenses amounted to $11.5 billion, which fell 5.7% year over year in the fourth quarter. This decrease was on account of lower insurance and annuity benefits and general and administrative expenses. The figure was higher than our estimate of $11.2 billion.

Quarterly Segment Update

Prudential Global Investment Management’s (PGIM) adjusted operating income of $230 million declined 34.3% year over year. The decrease primarily reflects lower asset management fees, due to a reduction in assets under management and lower Other Related Revenues, owing to lower incentive fees, agency income and transaction fees. It was partially offset by lower expenses.

PGIM assets under management of $1.2 trillion in the reported quarter, which fell 19% year over year due to higher interest rates and widening credit spreads, as well as declines in equity markets.

The U.S. Businesses delivered adjusted operating income of $864 million, which decreased 3.5% year over year. The downside was due to lower net investment spread results because of lower variable investment income and lower net fee income. It was partially offset by more favorable underwriting results.

Assurance IQ incurred an adjusted operating income of $29 million against the prior-year quarter’s net operating loss of $10 million. The improvement was driven by higher Medicare commission revenues and lower expenses.

International Businesses’ adjusted operating income decreased 25.4% year over year to $618 million in the fourth quarter. This decrease primarily reflects lower net investment spread results due to lower variable investment income, less favorable underwriting results, including unfavorable policyholder behavior and higher expenses.

Corporate and Other incurred an adjusted operating loss of $526 million, wider than the loss of $489 million reported a year ago. This higher loss reflects higher expenses, partially offset by higher income from pension and other employee benefit plans.

Capital Deployment

Prudential Financial managed to return capital to its shareholders in the form of share repurchases worth $375 million and dividends worth $449 million in the fourth quarter.

Dividend Hike Announced

Concurrent with fourth-quarter results, Prudential Financial’s board of directors approved a 4% hike in the quarterly dividend. With this, the dividend payout now stands at $1.25 per share compared with the prior payout of $1.20. The increased dividend will be paid on Mar 16, 2023 to shareholders of record as on Feb 21.

Financial Update

PRU exited the fourth quarter with cash and cash equivalents of $17.2 billion, which increased 33.8% from the 2021-end level. Total debt balance of $20.6 billion increased 6.9% from the figure at 2021-end. As of Dec 31, 2022, Prudential Financial’s assets under management decreased 20.9% year over year to $1.37 trillion. Adjusted book value per common share, a measure of the company’s net worth, came in at $99.22, which decreased 8.7% year over year. Operating return on average equity was 9.7% in the fourth quarter, which contracted 210 basis points (bps) year over year.

Full-Year Update

For 2022, the adjusted operating income of Prudential Financial was $9.46 per share. The bottom line declined 35.1% from the 2021 figure. The bottom line missed the Zacks Consensus Estimate by 1.4%.  Revenues for the year totaled $61.6 billion, which climbed 3% from the 2021 level. The top line missed the Zacks Consensus Estimate by 0.3%.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 5.21% due to these changes.

VGM Scores

Currently, Prudential has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.


Estimates have been broadly 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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