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Why it is Apt to Hold Prudential Financial (PRU) Stock Now


Prudential Financial, Inc. PRU has earned reputation in the Multi line insurance industry in the United States by meeting the expectations and ever-changing needs of its clients over a considerable period of time. Keeping its goodwill intact, the company offers a broad range of insurance, investment management and other financial products and services to its target market, building a solid product and service portfolio over the years.

The Multi line insurer will continue to benefit from its reach and an in-depth expertise in the pension risk transfer (PRT) business. The company is also on track to establish a leadership position in the potentially strong PRT market, suitable to mobilize the insurance company’s skills in the management of group annuity.

The company’s international operations too have positioned it well for long-term growth. It is expected to benefit from the AFP Habitat buyout, completed in the first quarter of 2016. The transaction, expanding its international footprint, is estimated to result in stable growth, steady earnings and an adequate cash flow generation. Therefore, the company remains focused on diversifying its activities to enable it to accelerate overall growth and leave a positive impact on the same in the near term.

The Zacks Rank #3 (Hold) Multi line insurer has successfully generated investors’ value by implementing some shareholder-friendly measures such as, dividend payments and share repurchases, over time. It has been approved of to buy back worth $1.25 billion shares in 2017. The company remains committed toward maintaining a solid capital and liquidity position, thereby protecting itself from market volatility.

However, an unfavorable currency impact and regulatory control remain headwinds. In addition, rising expenses have been raising concerns for the insurer and it does not expect a turnaround in the immediate term.

Shares of Prudential Financial have gained 7.06% year to date, outperforming the Zacks categorized Multi line Insurance industry’s increase of 6.31%. We expect the company’s sustained operational performance, improving asset under management and a robust capital position to drive the stock higher in the near term.

Notably, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.02 over a period of one year, a 21.5% discount to the industry average of 1.30.

Besides, the company has a trailing 12-month return on equity (ROE) of 8.5%, higher than the industry’s 6.9% average. Furthermore, the company’s expected long-term earnings growth is pegged at 8.50%.

Prudential Financial is set to release its second-quarter results on Aug 2. Though a Zacks Rank #3 increases the predictive power of ESP an Earnings ESP of -0.37% makes prediction difficult.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Reinsurance Group of America, Incorporated RGA, Cigna Corporation CI and Everest Re Group, Ltd. RE. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Reinsurance Group deals in reinsurance business. The company delivered positive surprises in three of the last four quarters with an average beat of 5.08%.

Cigna provides insurance plus related products and services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

Everest Re Group provides reinsurance and insurance products. The company delivered positive surprises in the last four quarters with an average beat of 49.74%.

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