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Prudential (PRU) Down 9.9% 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 9.9% 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 the most recent earnings report in order to get a better handle on the important drivers.

Prudential Financial Q3 Earnings & Revenues Top, Up Y/Y

Prudential Financial, Inc.’s third-quarter 2018 operating net income of $3.15 per share beat the Zacks Consensus Estimate by 0.3%. The bottom line also improved 4.7% year over year.

The company witnessed improved revenues and a solid performance at International Insurance in the quarter under review.

Including one-time items, net income per share of $3.90 declined 23.4% year over year.

Behind the Headlines

Total revenues of $14.4 billion grew 8% year over year on the back of higher premiums, net investment income as well as asset management fees, commissions and other income. Moreover, the top line exceeded the Zacks Consensus Estimate by 6.9%.

Total benefits and expenses of nearly $12.8 billion increased 10.3% year over year in the quarter under consideration. This increase in expenses is mainly attributable to higher insurance and annuity benefits, interest credited to policyholders’ account balances, interest expense, amortization of acquisition costs plus general and administrative expenses.

Quarterly Segment Update

PGIM — global investment management businesses — reported adjusted operating income of $230 million, down 11.2% year over year. This downside was attributable to a $34-million lower contribution from other related revenues as well as an increase in expenses related to business growth.
However, higher asset management fees reflecting a rise in assets under management, primarily driven by fixed income net inflows and equity market appreciation, partially offset this downside.

PGIM assets under management were $1.175 trillion at the reported quarter-end.

U.S. Workplace Solutions’ adjusted operating income was $298 million, down 3.6% from the year-ago quarter on lower contribution from Retirement as well as Group Insurance segments.

U.S. Individual Solutions reported adjusted operating income of $624 million, down 14.2% from the prior-year quarter. This unfavorable outcome is due to lower aid from Individual Annuities as well as Individual Life segments.

International Insurance delivered adjusted operating income of $890 million, up 11.4% from the year-earlier period owing to higher uptick from both Life Planner Operations and Gibraltar Life & Other Operations.

Corporate and Other Operations incurred adjusted operating loss of $374 million, wider than $310 million in the year-ago quarter.

Financial Update

Cash and cash equivalents of $12.5 billion at third-quarter end decreased 14.3% year over year.

As of Sep 30, 2018, Prudential Financial’s assets under management increased 3.2% to $1.41 trillion year over year. Adjusted book value, a measure of the company’s net worth, came in at $95.20 as of Sep 30, up 11.9% year over year.

Operating return on average equity was 13.6%.

Debt balance totaled $19.8 billion as of Sep 30, 2018, up 1.6% from $19.5 billion as of Sep 30, 2017.

Prudential Financial deployed $755 million in share buybacks and dividends in the reported quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Prudential has a poor Growth Score of F, 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 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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