Why is Prudential (PRU) up 4.6% since its last earnings report?

It has been about a month since Prudential’s (PRU) last earnings report. Shares rose about 4.6% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Prudential headed for a decline? 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 better understand the important catalysts.

Prudential Financial did not report profits for the first quarter, revenues increased y/y

Prudential Financial, Inc. reported first-quarter 2024 adjusted operating income of $3.12 per share, up 1.2% from the Zacks Consensus Estimate. The financial result increased by 15.5% year on year.

Total revenues of $21.7 billion grew 44.8% year-over-year, surpassing the Zacks Consensus Estimate by 46.8%. The increase in revenues is due to higher premiums, net investment income, asset management fees, commissions and other income. Prudential Financial’s quarterly results reflect increased asset management fees, positive third-party net flows, improved net investment spread performance and favorable underwriting performance, offset by higher costs.

Operational update

Total benefits and expenses were $20.2 billion, up 47.6% year-over-year in the first quarter. This increase resulted from higher insurance and disability benefits, interest charged to policyholders’ accounts, interest costs, amortization of acquisition costs and general administrative costs. This amount was higher than our estimate of $11.7 billion.

Quarterly segment update

Prudential Global Investment Management’s (PGIM) adjusted operating income of $169 million increased 12% year-over-year. This number beats the Zacks Consensus Estimate by 14%. Our estimate was $137.2 million. This increase was due to higher asset management fees and other related revenues due to higher incentive fees and seed and co-investment income. This was partially offset by higher expenses.

PGIM’s assets under management of $1.341 trillion in the reported quarter increased 6% year-over-year. The increase was due to the appreciation of the equity market and positive net flows from third parties.

U.S. companies achieved adjusted operating income of $839 million, up 10.4% year-over-year. This figure missed the Zacks Consensus Estimate by 12%. Our estimate was $1 billion. The increase was primarily due to higher net investment spread results and more favorable underwriting results. This was partially offset by higher costs and lower commission earnings.

International Businesses adjusted operating income increased 6.7% year-over-year to $896 million in the first quarter. This rate was higher than our estimate of USD 878.4 million. This increase was primarily due to higher net investment spread and joint venture earnings, partially offset by less favorable underwriting performance.

Corporate and other companies suffered an adjusted operating loss of $435 million, narrower than the loss of $471 million reported a year ago, primarily due to declining costs. That number was narrower than the Zacks Consensus Estimate of a loss of $474 million and our estimate of a loss of $471.3 million.

The story continues

Capital deployment

Prudential Financial managed to return capital to its shareholders in the first quarter in the form of share repurchases worth $250 million and dividends worth $476 million.

Financial update

PRU ended the first quarter with cash and cash equivalents of $18.7 billion, down 3.5% from the end of 2023. The total debt balance of $19.9 billion increased by 2.3% from the end of 2023. As of March 31, 2024, Prudential Financial’s assets under management and administration increased 6.5% year-over-year to $1.67 trillion. Adjusted book value per common share, a measure of a company’s net worth, was $97.03, down 0.2% year-over-year. Average operating return on equity was 13% in the first quarter, up 170 basis points year over year.

How have estimates changed since then?

It turns out that the review estimates have been trending upwards over the past month.

VGM results

Currently, Prudential has a solid Growth Score of B, although it lags slightly behind its Momentum Score with a C. However, the stock is rated an A on the value side, ranking in the top 20% of this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Prudential carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Prudential belongs to the Zacks Insurance – Multi line industry. Another company in the same industry, Everest Group (EG), has gained 3.5% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

Everest Group reported revenues of $4.13 billion in the most recently reported quarter, representing a year-over-year change of +26%. EPS of $16.32 in the same period compared to $11.31 a year ago.

For the current quarter, Everest Group is expected to report earnings per share of $17.21, representing a change of +13.2% from the prior-year quarter. The Zacks Consensus Estimate has changed -0.9% over the past 30 days.

Everest Group carries a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM rating of B.

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