A month has gone by since the last earnings report for Prudential (PRU). Shares have lost about 1.5% 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 drivers.
Prudential (PRU) Q2 Earnings & Revenues Lag Estimates, Up Y/Y
Prudential Financial's second-quarter 2018 operating net income of $3.01 per share missed the Zacks Consensus Estimate by 2.3%. The bottom line however, improved 44% year over year.
Stellar performances at International Insurance and improved results at PGIM drove this upside.
Behind the Headlines
Total revenues of $13 billion inched up 0.1% year over year as decrease in premiums was offset by higher policy charges and fee income, net investment income and asset management fees, commissions and other income. However, the top line lagged the Zacks Consensus Estimate by 8.1%.
Total benefits and expenses of nearly $11.3 billion declined 3.2% year over year in the quarter under review. This reduction in expenses is mainly attributable to lower insurance and annuity benefits, interest credited to policyholders, amortization of acquisition costs plus general and administrative expenses.
Quarterly Segment Update
PGIM - global investment management businesses - reported adjusted operating income of $254 million, up 16.5% year over year. This upside was owing to higher asset management fees, reflecting an increase in assets under management, primarily driven by fixed income net inflows and equity market appreciation. This in turn, is partially offset by rise in expenses.
PGIM assets under management were $1.156 trillion at quarter end.
U.S. Workplace Solutions adjusted operating income was $359 million, down 19.1% from the year-ago quarter on lower contribution from Retirement as well as Group Insurance segment.
International Insurance reported adjusted operating income of $550 million on the back of increased 10-fold year over year, largely because Individual Life segment returned to profitability and International Insurance delivered improved earnings.
Corporate and Other Operations reported adjusted operating loss of $286 million, narrower than $312 million incurred in the year-ago quarter.
Financial Update
Cash and cash equivalents of $14.9 billion at second-quarter end decreased 10.2% year over year.
As of Jun 30, 2018, Prudential Financial's assets under management increased 4% to $1.39 trillion year over year. Adjusted book value, a measure of the company's net worth, came in at $92.60 as of Jun 30, up 14.3% year over year.
Operating return on average equity was 13.5%.
Debt balance totaled $18.8 billion as of Jun 30, 2018, down from $19.4 billion as of Jun 30, 2017.
Prudential Financial deployed $760 million in share buybacks and dividends in the reported quarter.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
VGM Scores
At this time, Prudential has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
