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Prudential (PRU) Down 3.3% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Prudential (PRU). Shares have lost about 3.3% 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 catalysts.

Prudential Financial Q1 Earnings Miss on Higher Expenses

Prudential Financial, Inc. reported first-quarter 2023 adjusted operating income of $2.66 per share, which missed the Zacks Consensus Estimate by 11.9% and our estimate of operating income of $3.07. The bottom line declined 16.1% year over year.

Total revenues of $15,104 million increased 10.5% year over year, beating the Zacks Consensus Estimate by 13.7%. The rise in revenues was due to higher premiums, asset management fees, commissions and other income and net investment income. The figure was higher than our estimate of $12,905.3 million.

Prudential Financial's first-quarter results were affected by declining operating income year over year for all of its segments and rising expenses. Improving premiums and net investment income partially offset the negatives.

Operational Update

Total benefits and expenses amounted to $13,838 million, which rose 18% year over year in the first quarter. This increase was due to higher insurance and annuity benefits, interest credited to policyholders' account balances, interest expenses and general and administrative expenses. The figure was higher than our estimate of $11,442.2 million.

Quarterly Segment Update

Prudential Global Investment Management’s (PGIM) adjusted operating income of $151 million declined 19.7% year over year. The metric missed the Zacks Consensus Estimate by 17.5% and our estimate of $180.4 million. The decrease primarily reflects lower asset management fees due to a reduction in assets under management in the quarter. The negatives were partially offset by higher other-related revenues.

PGIM assets under management of $1.3 trillion in the reported quarter fell 10% year over year due to higher interest rates, net outflows and declining equity markets.

The U.S. Businesses delivered an adjusted operating income of $760 million, which decreased 6.5% year over year. The metric missed the Zacks Consensus Estimate by 19.6% and our estimate of $955.9 million. The downside was due to lower net investment spread results because of lower variable investment income and lower net fee income. It was partially offset by more favorable underwriting results.

International Businesses’ adjusted operating income decreased 11.7% year over year to $840 million in the first quarter. The metric beat the Zacks Consensus Estimate by 11.8% and our estimate of $743.4 million. This decrease primarily reflects lower net investment spread results due to lower variable investment income and less favorable underwriting results.

Corporate and Other incurred an adjusted operating loss of $485 million, wider than $416 million reported a year ago. The metric beat the Zacks Consensus Estimate by 18.9% and our estimate of a loss of $416.6 million. This higher loss reflects higher expenses, partially offset by higher net investment income.

Capital Deployment

Prudential Financial managed to return capital to its shareholders in the form of share repurchases worth $250 million and dividends worth $468 million in the first quarter.

Financial Update

PRU exited the first quarter with cash and cash equivalents of $17,425 million, which increased from $14,086 million at 2022-end. Total debt balance of $21.2 billion increased from $20.2 billion at 2022-end.

As of Mar 31, 2023, Prudential Financial’s assets under management and administration decreased 20.9% year over year to $1.6 trillion. Adjusted book value per common share, a measure of the company’s net worth, came in at $97.29, which decreased 4.7% year over year.

Operating return on average equity was 11.2% in the first quarter, which contracted 80 basis points year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Prudential has a poor Growth Score of F, a grade with the same score on the momentum front. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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