Prudential Financial Up 25.9% in a Year: More Room to Run?

Prudential Financial, Inc.'s PRU shares have rallied 25.9% in a year compared with the industry's growth of 14.7%. The Finance sector and the Zacks S&P 500 composite have risen 17.4% and 24.1%, respectively, in the same time frame.

With a market capitalization of $39.42 billion, the average volume of shares traded in the last three months was 1.56 million.

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The rally was largely driven by the growing pension risk transfer (PRT) market, higher emerging markets earnings, expanding distribution, product offerings, improved spread income, strategic acquisitions and a solid financial position.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 0.07% and 0.2% north, respectively, in the past seven days, reflecting analysts' optimism on the stock.

Will the Bull Run Continue?

The Zacks Consensus Estimate for PRU's 2024 earnings per share indicates a year-over-year increase of 15.3% from the consensus estimate of 2023. The consensus estimate for revenues is pegged at $55.57 billion, implying a year-over-year improvement of 9.1% from the consensus mark of 2023.
The consensus estimate for 2025 earnings per share indicates a year-over-year increase of 8.3% from the consensus estimate of 2024. The consensus estimate for 2025 revenues is pinned at $57.19 billion, implying a year-over-year improvement of 2.9% from the consensus mark of 2024.
In 2023, Prudential Financial's return on equity of 16% expanded 120 basis points year over year. This shows the company's efficiency in managing shareholders' funds.
This Zacks Rank #3 (Hold) multi-line insurer's International businesses are expected to gain from higher emerging markets earnings, a favorable impact from annual assumption update and other refinements. It aims at providing high-quality service and expanding distribution and product offerings via a differentiated multi-channel distribution model as well as other businesses.
The U.S. businesses should continue to gain from a favorable and comparable impact from annual assumption update, higher spread income and more favorable underwriting.
Prudential Financial 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, whose market 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.
Prudential Financial boasts a sturdy balance sheet strength that includes highly liquid assets of $4.5 billion as of Dec 31, 2023 and a capital position that continues to support an AA financial strength rating. The company continues to balance investments in the growth of businesses with returning capital to shareholders.
The multi-line insurer has been increasing its dividend for the past 15 years. Its dividend yield of 4.7% compares favorably with the industry's figure of 2.6%. In the first quarter of 2024, the board also authorized a 4% dividend increase, which represents the 16th consecutive annual dividend increase.

Stocks to Consider

Some better-ranked stocks from the insurance industry are HCI Group, Inc. HCI, Palomar Holdings, Inc. PLMR and Mercury General Corporation MCY, each sporting a Zacks Rank #1 (Strong Buy) at present.
HCI Group has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 522.51%. In the past year, shares of HCI have surged 114.4%.
The Zacks Consensus Estimate for HCI's 2024 and 2025 earnings implies year-over-year growth of 37.9% and 11.6%, respectively, from the consensus estimate of the corresponding years.
Palomar Holdings has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 11.12%. In the past year, shares of PLMR have soared 38.6%.
The Zacks Consensus Estimate for PLMR's 2024 and 2025 earnings implies year-over-year growth of 16.2% and 18%, respectively, from the consensus estimate of the corresponding years.
Mercury General has a solid track record of beating earnings estimates in three of the trailing four quarters and missed in one, the average being 3,417.48%. In the past year, shares of MCY have rallied 68.4%.
The Zacks Consensus Estimate for MCY's 2024 and 2025 earnings implies year-over-year growth of 866.67% and 34.48%, respectively, from the consensus estimate of the corresponding years.

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