Will prudential financial stocks beat the consensus in the second quarter?

Prudential Financial (NYSE: PRU) is scheduled to release its fiscal second quarter 2022 results on Tuesday, August 2 (after market close). We expect Prudential Financial
to beat consensus revenue and profit estimates. The insurance giant posted mixed results last quarter, with total revenue of $13.2 billion, down 22% year-on-year. This was primarily due to a significant decline in net realized investment gains, followed by a decline in asset management fees, commissions and other income. However, the negative impact was somewhat offset by a 5% growth in total premiums. Premiums mainly benefited from the growth of the retirement business in the United States. We expect the same trend to continue in the second quarter.

Our forecast indicates that Prudential Financial valuation is $113 per share, or 13% above the current market price of around $100. Our interactive dashboard analysis on Prudential Financial Earnings Snapshot has more details.

(1) Revenues are expected to exceed consensus estimates

Prudential Financial revenue grew 24% year-on-year to $70.9 billion in 2021. It was driven by 12% growth in premiums, followed by a 5% increase in net investment income and an increase 24% of asset management fees and other income. Additionally, total realized investment gains (losses) increased from -$3.9 billion to $4 billion.

  • Premiums increased by 5% year-on-year in the first quarter of 2022. This was driven by a 24% growth in activity in the United States, mainly driven by a 52% increase in the pensions segment. In contrast, the international segment recorded a 4% year-on-year decline in premium revenue. We expect the same trend to continue in the second quarter.
  • Net investment income grew marginally in the first quarter of the year. We expect the stream to benefit from higher investment returns in the second quarter.
  • Overall, we estimate Prudential Financial’s revenue will remain around $59.9 billion for the full year 2022.

Trefis estimates that Prudential Financial’s second quarter 2022 net revenue will be approximately $12.52 billion, 2% higher than the consensus estimate of $12.27 billion.

(2) EPS expected to exceed consensus estimates

Prudential Financial’s adjusted earnings per share for Q2 2022 are expected to be $2.45 per Trefis analysis, nearly 4% above the consensus estimate of $2.36. The company’s net income increased from -$374 million to $7.6 billion in 2021. This was due to revenue growth and lower expenses as a % of revenue. That said, expenses as a % of revenue increased in the first quarter of 2022. This, coupled with lower revenue, led to adjusted net income of -$31 million, compared to $2.8 billion previously. We expect the spending figure to improve in the second quarter. Overall, Prudential Financial is likely to report an annual GAA
P EPS of $13.25 for the year 2022.

(3) The stock price estimate is 13% above the current market price

We arrive at Prudential Financial valuationusing an EPS estimate of around $13.25 and a P/E multiple just below 9x for fiscal year 2022. This translates to a price of $113, or 13% above the current price of the market around $100.

Note: P/E multiples are based on year-end stock price and reported (or expected) adjusted earnings for the full year

With inflation rising and the Fed raising interest rates, Prudential Financial has fallen 8% this year. Can it fall more? See how far Prudential Financial’s stock can go by comparing its drop in past stock market crashes. Here is a summary of how all stocks performed during previous stock market crashes.

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