In a report published Thursday, Morgan Stanley analyst Nigel Dally reiterated an Overweight rating on Prudential Financial PRU, but lowered the price target from $102.00 to $98.00.
In the report, Morgan Stanley noted, "Prudential has delivered substantial improvements in its earnings and return on equity over the last several years. That said, the fourth quarter results tend to be the weakest for the year, with this quarter being no exception. While core results essentially matched our expectations, they included various items that may not be sustainable in the future. The larger concern, however, is that estimated on-balance sheet excess capital mysteriously declined $1.5 billion to $2.0 billion, with the drivers of the decline not discussed by management. Further, we viewed further hedge breakage against annuities negatively given the recurring nature of charges we have seen from the company. Reflecting these factors, we are reducing our price target $4 to $98, although our Overweight rating given the stock's low valuation remains unchanged."
Prudential Financial closed on Wednesday at $79.89.
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