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Prudential (PRU) Down 6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Prudential (PRU - Free Report) . Shares have lost about 6% 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 catalysts.

Prudential Q1 Earnings and Revenues Miss Estimates

Prudential Financial's first-quarter 2019 operating net income of $3.00 per share missed the Zacks Consensus Estimate by 4.5%. The bottom line also declined 2.6% year over year.

The company witnessed weak performances in PGIM and U.S. Workplace Solutions segments.    

Including one-time items, net income per share of $3.14 declined 29% year over year.

Behind the Headlines

Total revenues of $13.6 billion grew 6% year over year on the back of higher premiums and net investment income. However, the top line missed the Zacks Consensus Estimate of $13.7 billion.

Total benefits and expenses of $11.2 billion increased 8% 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, general and administrative expenses and amortization of acquisition costs.

Quarterly Segment Update

PGIM — global investment management businesses — reported adjusted operating income of $214 million, down 7.8% year over year. This downside was attributable to higher expenses, partially offset by higher asset management fees, reflecting an increase in average 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 $304 million, down 18.3% from the year-ago quarter on lower contribution from Retirement segment and Group Insurance segments.

U.S. Individual Solutions reported adjusted operating income of $577 million, up nearly 4% from the prior-year quarter, driven by higher contribution from Individual Life, partially offset by lower earnings from Individual Annuities.

International Insurance delivered adjusted operating income of $922 million, up 7.7% from the year-earlier period owing to higher income at both Life Planner Operations and Gibraltar Life & Other Operations.

Corporate and Other Operations incurred adjusted operating loss of $412 million, wider than loss of $294 million in the year-ago quarter.

Financial Update

Cash and cash equivalents of $14.7 billion at quarter end decreased 6.8% year over year.

As of Mar 31, 2019, Prudential Financial’s assets under management and administration increased 4.8% to $1.5 trillion year over year.

Adjusted book value, a measure of the company’s net worth, came in at $96.76 as of Mar 31, 2019, up 3.4% year over year.

Operating return on average equity was 12.6%, almost matching the higher end of 12-13% target.

Debt balance totaled $20.9 billion as of Mar 31, 2019, up 5.2% year over year.

Prudential Financial deployed $500 million in share buybacks and increased dividend by 11%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Prudential has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second 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

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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