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PRU Lags Industry, Trades at a Discount: What Should Investors Do Now?
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Key Takeaways
Prudential Financial's shares have lost 11.4% in the past year against the industry's growth of 8.1%.
PRU's international business provides organic growth opportunities and contributes meaningfully to earnings.
PRU gains from solid asset-based businesses, strength in asset management and pension risk transfer markets.
Shares of Prudential Financial Inc. (PRU - Free Report) have lost 11.4% in the past year, underperforming the industry, the Zacks S&P 500 composite and the Finance sector’s growth of 8.1%, 11.4% and 19.5%, respectively.
The insurer has a market capitalization of $36.73 billion. The average volume of shares traded in the last three months was 1.9 million.
PRU Vs Industry, Sector, S&P 500
Image Source: Zacks Investment Research
PRU Shares are Affordable
PRU shares are trading at a price to forward 12-months earnings of 7.34X, lower than the industry average of 8.91X, the Finance sector’s 16.21X and the Zacks S&P 500 Composite’s 21.83X. Its pricing, at a discount to the industry average, gives a better entry point to investors. Also, it has a Value Score of A.
Shares of other insurers like Horace Mann Educators Corporation (HMN - Free Report) and EverQuote, Inc. (EVER - Free Report) are trading at a multiple higher than the industry average, while shares of MGIC Investment Corporation (MTG - Free Report) are trading at a discount to the industry average.
Image Source: Zacks Investment Research
PRU’s Growth Projection Encourages
The Zacks Consensus Estimate for Prudential Financial’s 2025 earnings per share indicates a year-over-year increase of 8.2%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.2% and 4.1%, respectively, from the corresponding 2025 estimates.
Bearish Analyst Sentiment on PRU
Three of the nine analysts covering the stock have lowered estimates for 2025, while two analysts have lowered the same for 2026 over the past 30 days.
The Zacks Consensus Estimate for 2025 earnings has moved down 0.8% in the past 30 days, while the same for 2026 has moved down 0.2% in the same time frame.
Image Source: Zacks Investment Research
Target Price Reflects Potential Upside
Based on short-term price targets offered by 15 analysts, the Zacks average price target is $114.87 per share. The average indicates a potential 10% upside from the last closing price.
Image Source: Zacks Investment Research
PRU’s Return on Capital
PRU’s trailing 12-month return on equity is 15.8%, ahead of the industry average of 14.8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Factors Impacting PRU
Prudential Financial is witnessing huge demand for retirement benefit products for baby boomers, which is expected to continue. The U.S. Census Bureau projects that nearly 25% of the population will be 65 years or older by 2050. PRU’s vast distribution network, compelling product portfolio and superior brand image will give it a competitive edge. The company intends to be a global leader in expanding its access to investment, insurance and retirement security.
It 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.
Prudential Financial has a strong international presence that gives it more organic growth opportunities than its peers. Expanding its international business is vital for long-term growth. PRU has a strong footprint in Japan, which offers attractive opportunities to capitalize on protection products and retirement needs and has historically generated ROE in the 20% range. Its business in Brazil has gained sufficient scale and should become an important contributor to earnings growth in the international division over the next few years. It has also expanded in Malaysia, which is an attractive market with low life insurance penetration, a well-developed regulatory environment and long-term growth potential.
PRU has been increasing its dividend for the past 16 years. The company continues to balance investments in the growth of businesses with returning capital to shareholders.
Conclusion
Prudential Financial continues to benefit from its solid asset-based businesses, improved margins in the Group Insurance business and international operations. A high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth.
Prudential Financial’s exposure to products like annuities and universal life, which guarantee a minimum return, will strain its capital. Its results have been suffering due to additional reserve accretion required when the low interest rate increases the value of these liabilities. The company expects individual annuities sales to continue to be lower in the near term due to the repricing and repositioning of products. Lower sales reflect its pivot to less market-sensitive products. PRU also has a VGM Score of B. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers.
Image: Bigstock
PRU Lags Industry, Trades at a Discount: What Should Investors Do Now?
Key Takeaways
Shares of Prudential Financial Inc. (PRU - Free Report) have lost 11.4% in the past year, underperforming the industry, the Zacks S&P 500 composite and the Finance sector’s growth of 8.1%, 11.4% and 19.5%, respectively.
The insurer has a market capitalization of $36.73 billion. The average volume of shares traded in the last three months was 1.9 million.
PRU Vs Industry, Sector, S&P 500
Image Source: Zacks Investment Research
PRU Shares are Affordable
PRU shares are trading at a price to forward 12-months earnings of 7.34X, lower than the industry average of 8.91X, the Finance sector’s 16.21X and the Zacks S&P 500 Composite’s 21.83X. Its pricing, at a discount to the industry average, gives a better entry point to investors. Also, it has a Value Score of A.
Shares of other insurers like Horace Mann Educators Corporation (HMN - Free Report) and EverQuote, Inc. (EVER - Free Report) are trading at a multiple higher than the industry average, while shares of MGIC Investment Corporation (MTG - Free Report) are trading at a discount to the industry average.
Image Source: Zacks Investment Research
PRU’s Growth Projection Encourages
The Zacks Consensus Estimate for Prudential Financial’s 2025 earnings per share indicates a year-over-year increase of 8.2%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.2% and 4.1%, respectively, from the corresponding 2025 estimates.
Bearish Analyst Sentiment on PRU
Three of the nine analysts covering the stock have lowered estimates for 2025, while two analysts have lowered the same for 2026 over the past 30 days.
The Zacks Consensus Estimate for 2025 earnings has moved down 0.8% in the past 30 days, while the same for 2026 has moved down 0.2% in the same time frame.
Image Source: Zacks Investment Research
Target Price Reflects Potential Upside
Based on short-term price targets offered by 15 analysts, the Zacks average price target is $114.87 per share. The average indicates a potential 10% upside from the last closing price.
Image Source: Zacks Investment Research
PRU’s Return on Capital
PRU’s trailing 12-month return on equity is 15.8%, ahead of the industry average of 14.8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Factors Impacting PRU
Prudential Financial is witnessing huge demand for retirement benefit products for baby boomers, which is expected to continue. The U.S. Census Bureau projects that nearly 25% of the population will be 65 years or older by 2050. PRU’s vast distribution network, compelling product portfolio and superior brand image will give it a competitive edge. The company intends to be a global leader in expanding its access to investment, insurance and retirement security.
It 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.
Prudential Financial has a strong international presence that gives it more organic growth opportunities than its peers. Expanding its international business is vital for long-term growth. PRU has a strong footprint in Japan, which offers attractive opportunities to capitalize on protection products and retirement needs and has historically generated ROE in the 20% range. Its business in Brazil has gained sufficient scale and should become an important contributor to earnings growth in the international division over the next few years. It has also expanded in Malaysia, which is an attractive market with low life insurance penetration, a well-developed regulatory environment and long-term growth potential.
PRU has been increasing its dividend for the past 16 years. The company continues to balance investments in the growth of businesses with returning capital to shareholders.
Conclusion
Prudential Financial continues to benefit from its solid asset-based businesses, improved margins in the Group Insurance business and international operations. A high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth.
Prudential Financial’s exposure to products like annuities and universal life, which guarantee a minimum return, will strain its capital. Its results have been suffering due to additional reserve accretion required when the low interest rate increases the value of these liabilities. The company expects individual annuities sales to continue to be lower in the near term due to the repricing and repositioning of products. Lower sales reflect its pivot to less market-sensitive products. PRU also has a VGM Score of B. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers.
Given its bearish analysts’ sentiment, we prefer to remain cautious on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.