It has been about a month since the last earnings report for Prudential (PRU - Free Report) . Shares have added about 3.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prudential due for a pullback? 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 catalysts.
Prudential Q4 Earnings Miss, Revenues Beat Estimates
Prudential Financial's fourth-quarter 2018 operating net income of $2.44 per share missed the Zacks Consensus Estimate by 15.3%. The bottom line also declined 9.3% year over year.
The company witnessed weak performances across all its segments. Including one-time items, net income per share of $1.99 declined 76.9% year over year.
Behind the Headlines
Total revenues of $17.8 billion grew 16.9% 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 beat the Zacks Consensus Estimate by 26.7%.
Total benefits and expenses of nearly $16.5 billion increased 20.4% year over year in the quarter. This increase in expenses was mainly attributable to higher insurance and annuity benefits, interest credited to policyholders’ account balances, interest expense, and amortization of acquisition costs.
Full Year Highlights
Operating net income of $11.69 per share missed the Zacks Consensus Estimate by 3.6%. The bottom line however improved 10.5% year over year.
Revenues of $51.8 billion improved 9% from 2017. However, it missed the Zacks Consensus Estimate of $54 4 billion.
Quarterly Segment Update
PGIM — global investment management businesses — reported adjusted operating income of $243 million, down 20.6% year over year. This downside was attributable to a $67-million lower contribution from other related revenues, partially offset by higher asset management fees reflecting a rise in assets under management.
PGIM assets under management were $1.2 trillion at the end of the reported quarter.
U.S. Workplace Solutions’ adjusted operating income was $219 million, down 20.4% from the year-ago quarter on lower contribution from Retirement segment, partially offset by higher contribution from Group Insurance segments.
U.S. Individual Solutions reported adjusted operating income of $419 million was down 34.4% from the prior-year quarter. This unfavorable outcome was due to lower aid from Individual Annuities and loss incurred at Individual Life segments.
International Insurance delivered adjusted operating income of $736 million, down 5.3% from the year-earlier period owing to lower income at both Life Planner Operations and Gibraltar Life & Other Operations.
Corporate and Other Operations incurred adjusted operating loss of $329 million, narrower than loss of $463 million in the year-ago quarter.
Cash and cash equivalents of $15.4 billion at year end increased nearly 6% year over year.
As of Dec 31, 2018, Prudential Financial’s assets under management and administration increased 0.2% to $1.6 trillion year over year. Adjusted book value, a measure of the company’s net worth, came in at $96.06 as of Dec 31, up 8.3% year over year.
Operating return on average equity was 13%, matching the higher end of 12-13% target.
Debt balance totaled $19.8 billion as of Dec 31, 2018, up 6.9% year over year.
Prudential Financial deployed more than $3 billion in share buybacks and dividends in 2018.
On Feb 6, the board of directors announced dividend of $1.00 per share, payable on Mar 14, 2019, to shareholders of record on Feb 20, 2019. This translates to an 11% increase over the prior year dividend level.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Prudential has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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 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.