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Prudential Poised for Long-Term Growth Despite Headwinds


On Oct 14, we issued an updated research report on Prudential Financial Inc. PRU.

Prudential is supported by its strong Retirement segment, which in turn, is benefited by the company’s reach and leadership in the pension risk transfer (PRT) business. The company is striving to further fortify its position in the PRT market, which has great potential and is an excellent fit for its skills in managing group annuity.

The company’s solid international presence (mainly in Japan, Korea and China) offers it more organic growth opportunities than its peers. Inorganic portfolio remains impressive with strategic acquisitions. The company also boasts high performing asset management business.

Prudential has successfully generated investors’ value through its capital strength. The company pursues several actions to improve its capital flexibility and reduce volatility. This has led to a $500 million increase in the share buyback authorization for the second half of 2016. The hike has taken the total authorization to $2 billion for 2016.

The Zacks Consensus Estimate has also been revised upward movement over the last few weeks.

However, exposure to products like annuities and universal life, which guarantee minimum return, will strain its capital. Also, a sustained low interest rate environment continues to weigh on investment results.

Prudential is scheduled to report its third-quarter earnings on Nov 2, after the market closes. Our proven model shows that the company will deliver a positive surprise this quarter as it has the right combination of a favorable Zacks Rank and positive Earnings ESP. The Zack Rank #3 (Hold) increases the predictive power of a beat when combined with Earnings ESP of +1.21%. However, with respect to surprise trend, the company has missed expectation in the last four quarters.

Stocks to Consider

Some better-ranked insurers are Everest Re Group Ltd RE, NMIH Holdings, Inc. NMIH and Selective Insurance Group Inc. SIGI. Each of these carries Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Everest Re Group, a writer of property and casualty (P&C), reinsurance and insurance in the U.S, Bermuda and international markets has an Earnings ESP of +9.43%. The company is scheduled to report third-quarter earnings on Oct 24. The Zacks Consensus Estimate is currently pegged at $3.71.

NMIH Holdings, a provider of private mortgage guaranty insurance services in the United States, has an Earnings ESP of 0.00%. The company is expected to report third-quarter earnings on Oct 25. The Zacks Consensus Estimate is currently pegged at 7 cents.

Selective Insurance, a provider of insurance products and services in the United States has an Earnings ESP of 0.00%. The company is scheduled to report third-quarter earnings on Oct 26. The Zacks Consensus Estimate is currently pegged at 67 cents.

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