A month has gone by since the last earnings report for Prudential (PRU - Free Report) . Shares have lost about 1.8% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Prudential Financial (PRU - Free Report) Q3 Earnings Top, Revenues Miss
Prudential Financial, Inc.’s third-quarter 2019 operating net income of $3.22 per share beat the Zacks Consensus Estimate by 4.6%. Moreover, the bottom line increased 2.2% year over year.
Better-than -expected results were driven by increased contribution at Prudential Global Investment Management (PGIM) and U.S. Workplace Solutions segments. This upside was partly offset by soft at U.S. Individual Solutions and International Insurance segments.
Behind the Headlines
Total revenues of $12.9 billion were down 10.4% year over year due to lower premiums and asset management fees, commissions and other income. The top line missed the Zacks Consensus Estimate by 9.7%.
Total benefits and expenses of $11.3 billion decreased 11.7% year over year in the quarter. This decrease in expenses was mainly attributable to lower insurance and annuity benefits.
Quarterly Segment Update
PGIM reported adjusted operating income of $232 million, up 0.9% year over year. This upside was attributable to higher asset management fees due to an increase in average assets under management, and higher other related revenues, mostly offset by higher expenses.
PGIM assets under management were $1.3 trillion at the end of the reported quarter, up 9% year over year.
U.S. Workplace Solutions’ adjusted operating income was $392 million, up 31.5% from the year-ago quarter on higher contribution from Retirement as well as Group Insurance segment.
U.S. Individual Solutions reported adjusted operating income of $518 million, down 17% from the prior-year quarter, attributable to lower earnings from Individual Life business.
International Insurance delivered adjusted operating income of $791 million, down 11.1% 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 $281 million, narrower than loss of $374 million in the year-ago quarter.
Cash and cash equivalents of $18.3 billion at quarter end increased 46.7% year over year.
Debt balance totaled $20.6 billion as of Sep 30, 2019, up 4.1% from the level as of 2018 end.
As of Sep 30, 2019, Prudential Financial’s assets under management and administration increased 8.7% year over year to $1.8 trillion.
Adjusted book value per common share, a measure of the company’s net worth, came in at $99.67 as of Sep 30, 2019, up 4.7% year over year.
Operating return on average equity was 13.3% in the third quarter, contracting 30 basis points year over year.
Prudential Financial returned $1.4 billion to its shareholders and repurchased $1 billion of its common stock in the third quarter.
In the third quarter, Prudential Financial expanded its financial opportunity to a wider demographic. Its recent acquisition of Assurance IQ expanded its distribution capabilities with a direct-to consumer platform. The company is on track to achieve $50 million in run-rate margin expansion by the end of 2019 and $500 million by the end of 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12.34% due to these changes.
At this time, Prudential has a nice Growth Score of B, however its Momentum Score is doing a bit 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 A. 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. It's no surprise Prudential has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.