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Prudential (PRU) Rises 52.3% in a Year: Will the Rally Last?

Prudential Financial, Inc.’s PRU shares have rallied 52.3% in a year compared with the industry's growth of 27.6%. The Finance sector and the Zacks S&P 500 composite have risen 26.2% and 27.1%, respectively, in the same time frame. With a market capitalization of $42.68 billion, the average volume of shares traded in the last three months was 1.45 million.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The rally was largely driven by the growing pension risk transfer (PRT) market, improved spread income, strategic acquisitions, favorable variable investment income, strong underwriting results and a solid financial position.

Will the Bull Run Continue?

The Zacks Consensus Estimate for PRU’s 2024 earnings per share indicates a year-over-year increase of 15.5%. The consensus estimate for revenues is pegged at $60.57 billion, implying a year-over-year improvement of 19%.

The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 8.2% from the consensus estimate of 2024.

In the first quarter of 2024, Prudential’s operating return on average equity was 13%, which expanded 170 basis points year over year. This shows the company’s efficiency in managing shareholders’ funds.

PRU’s International businesses are expected to gain from increased spread income, including the benefit of elevated interest rates and more favorable variable investment income, and higher joint venture earnings due to the favorable performance in Chile.

The U.S. businesses should continue to gain from higher spread income due to business growth and more favorable underwriting results.

Prudential has been a leader in the PRT market, helping companies reduce risks related to pension liabilities, such as interest rate risk, earnings volatility and participant longevity. PRU recently announced that it has been selected for a PRT transaction from Verizon Communications Inc. This move bodes well for the insurer’s Retirement Strategies business, which is expected to grow over time.

The multi-line insurer continues to invest in partnerships that enable it to grow in emerging markets. PRU undertakes several strategic initiatives, which poise it well for long-term growth. It continues to invest in the long-term sustainable growth of the business through programmatic acquisitions and partnerships in emerging markets to build scale and complement businesses in support of long-term growth.

This Zacks Rank #3 (Hold) multi-line insurer boasts a sturdy balance sheet strength that includes cash and liquid assets of $4.2 billion within the liquidity target range of $3-$5 billion. The company continues to balance investments in the growth of businesses with returning capital to shareholders.

PRU has been increasing its dividend for the past 15 years. Its dividend yield of 4.3% compares favorably with the industry’s figure of 2.4%. In the first quarter of 2024, the board also authorized a 4% dividend increase, which represents the 16th consecutive annual dividend hike. The company’s capital deployment is supported by its sturdy balance sheet strength, which continues to support an AA financial strength rating. As of Mar 31, 2024, 2.3 million shares were repurchased under this authorization for $250 million.

Stocks to Consider

Some better-ranked stocks from the multi-line insurance industry are Old Republic International Corporation ORI and EverQuote, Inc. EVER, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old Republic International has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 6.61%. In the past year, shares of ORI have climbed 23.3%.

The Zacks Consensus Estimate for ORI’s 2024 and 2025 earnings implies year-over-year growth of 3.8% and 4.4%, respectively.

EverQuote has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 65.16%. In the past year, shares of EVER have skyrocketed 245.3%.

The Zacks Consensus Estimate for EVER’s 2024 and 2025 earnings implies year-over-year growth of 98% and 550%, respectively.

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