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Why Is Prudential Financial (PRU) Down 3.3% Since its Last Earnings Report?

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It has been about a month since the last earnings report for Prudential Financial, Inc. (PRU - Free Report) . Shares have lost about 3.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PRU 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 catalysts.

Prudential (PRU - Free Report) Q1 Earnings Top, Revenues Miss Estimates

Prudential Financial, Inc.’s  first-quarter 2018 adjusted net income of $3.08 per share beat the Zacks Consensus Estimate of $2.99 by 3%. The bottom line also improved 10.4% year over year.

Improved performances at Investment Management Division and International Insurance aided the above upside.

Behind the Headlines

Total revenues rose 7.2% year over year to $12.9 billion on the back of 15% growth in premiums and a 1.3% increase in policy charges and fee income, partially offset by 0.5% lower net investment income. However, the top line missed the Zacks Consensus Estimate by 5.9%.

Total benefits and expenses of nearly $11.2 billion increased 7.8% year over year in the quarter under review. This increase in expenses is mainly attributable to higher insurance and annuity benefits, interest expense, amortization of acquisition costs and general and administrative expenses.

Quarterly Segment Update

Total U.S. Individual Solutions reported adjusted operating income of $555 million, down 5.3% year over year. This downside was attributable to a nearly 67% drop in contribution from Individual Life.

Total U.S. Workplace Solutions adjusted operating income was $375 million, down 13.7% from the year-ago quarter, attributable to lower contribution from Retirement.

Total Investment Management Division adjusted operating income improved 18.4% to $232 million, driven by higher asset management fees.

Total International Insurance reported adjusted operating income of $856 million, up 7.1% year over year, driven by higher contribution from Life Planner and Gibraltar Life and Other operations.

Corporate and Other Operations reported adjusted operating loss of $294 million, narrower than the loss of $352 million in the year-ago quarter.

Financial Update

Cash and cash equivalents of $15.7 billion at first-quarter end increased 17.8% year over year.

As of Mar 31, 2018, Prudential Financial’s assets under management increased 6.9% to $1.4 trillion year over year. Adjusted book value, a measure of the company’s net worth, was $93.55 per share as of Mar 31, 2018, up 15.3% year over year.

Operating return on average equity was 13.7%, having contracted 40 basis points year over year.

Debt balance totaled $15.5 billion as of Mar 31, 2018, down from $18.6 billion as of Dec 31, 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.

Prudential Financial, Inc. Price and Consensus

 

VGM Scores

At this time, PRU has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. Following the exact same course, the stock was also allocated a grade of A on the value side, putting it in the top quintile 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.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, PRU has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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