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Here's Why Hold Strategy Is Apt for Prudential Financial (PRU)

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Prudential Financial, Inc. (PRU - Free Report) remains well-poised for growth, driven by higher premiums, strategic acquisitions, favorable underwriting results and effective capital deployment.

Zacks Rank & Price Performance

Prudential Financial currently carries a Zacks Rank #3 (Hold). In the past year, PRU stock has lost 0.5% against the industry’s growth of 6.7%.

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Return on Equity

PRU’s return on equity for the trailing 12 months is 14%, which compares favorably with the industry average of 9.7%. This reflects efficiency in utilizing shareholders’ funds. 

Optimistic Growth Projections

The Zacks Consensus Estimate for Prudential Financial’s 2023 and 2024 earnings per share is pegged at $11.90 and $12.91, indicating a respective year-over-year increase of 25.7% and 8.5%.

Business Tailwinds

Prudential Financial’s international businesses remain well-poised to gain from continued business growth, higher net investment spread, lower expenses and higher earnings from joint venture investments, as well as favorable underwriting results.

U.S. businesses should continue to gain from a higher net investment spread, which includes benefits from variable investment income, lower expenses on the back of cost-saving initiatives and rising interest rates. Given its leading position in universal, term and variable life insurance and expanding Retirement business, premium growth is likely to continue in the coming quarters.

The U.S. business continues to shift toward higher growth and less market-sensitive products and markets, enhance customer experience, while reducing costs and further expanding addressable markets.

The multi-line insurer continues to invest in acquisitions and partnerships that enable it to grow in emerging markets. In the third quarter of 2022, the company acquired a 33% minority interest in Alexander Forbes Group Holdings Limited in South Africa. This investment is consistent with PRU’s strategic focus internationally on higher-growth emerging markets. The deal furthers the partnership’s specific objective to identify and make strategic investments in high-quality financial services companies in selected African geographies.

Prudential Financial undertakes several strategic initiatives, which poise it well for long-term growth. It continues to invest in the long-term sustainable growth of the business through programmatic acquisitions and partnerships in emerging markets to build scale and complement businesses in support of long-term growth.

The company’s solid financial position provides it with the flexibility to execute its transformation and invest in the long-term growth of businesses.

Prudential Financial has been increasing its dividend for the past 15 years. In February 2023, the board also authorized 4% dividend increase beginning in the first quarter, which represents the 15th consecutive annual dividend increase.
PRU continues to balance investments in the growth of businesses with returning capital to shareholders.

The Zacks Consensus Estimate for 2023 earnings has moved 1% north in the past 30 days. This should instill investors' confidence in the stock.

Stocks to Consider

Some better-ranked stocks from the insurance industry are RLI Corp. (RLI - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and Root, Inc. (ROOT - Free Report) . While RLI Corp. sports a Zacks Rank #1 (Strong Buy), Kinsale Capital and Root carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI beat estimates in each of the last four quarters, the average being 43.50%. Year to date, the insurer has gained 3.3%.

The Zacks Consensus Estimate for 2023 and 2024 has moved 3.6% and 10.9% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.

Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. Year to date, KNSL has climbed 43.9%.

The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.62 and $13.05, indicating a year-over-year increase of 36.1% and 22.9%, respectively.

Root beat estimates in each of the last four quarters, the average being 18.24%. Year to date, the insurer has rallied 181.3%.

The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 47.3%, respectively.

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