A month has gone by since the last earnings report for Prudential (PRU). Shares have lost about 3% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Prudential Financial, Inc. reported fourth-quarter 2024 adjusted operating income of $2.96 per share, which missed the Zacks Consensus Estimate by 9.7%. However, the bottom line rose 16.5% year over year.
Total revenues of $13 billion increased 1% year over year. The increase in revenues was due to higher policy charges, fee income and net investment income. However, it missed the Zacks Consensus Estimate by 8%. Prudential Financial's fourth-quarter results reflect lower expenses, higher asset management fees, net inflows and higher net investment spread results, partially offset by soft performance at the U.S. Businesses.
Operational Update
Total benefits and expenses amounted to $11.6 billion, which decreased 0.03% year over year in the fourth quarter due to lower insurance and annuity benefits. The decrease was partially offset by higher interest credited to policyholders' account balances, interest expense, amortization of acquisition costs and general and administrative expenses. The figure was lower than our estimate of $13.2 billion.
Quarterly Segment Update
Prudential Global Investment Management’s (PGIM) adjusted operating income of $259 million in the reported quarter increased 50.6% year over year. This increase primarily reflects higher asset management fees and other related revenues, which were driven by higher incentive fees. It was partially offset by higher expenses. The figure was higher than our estimate of $236.2 million. PGIM’s assets under management of $1.375 trillion increased 6% year over year. The increase was driven by net inflows, equity market appreciation and strong investment performance.
The U.S. Businesses delivered an adjusted operating income of $860 million, which decreased 10.7% year over year. This decrease primarily reflects higher expenses, related to one-time transaction impacts associated with closing the Guaranteed Universal Life reinsurance transaction and the consolidation of captive financing arrangements, lower net fee income, and less favorable underwriting results. It was partially offset by higher net investment spread results. The figure was lower than our estimate of $1.1 billion.
International Businesses’ adjusted operating income decreased 0.8% year over year to $742 million in the fourth quarter. This decrease primarily reflects less favorable underwriting results and higher expenses. It was partially offset by higher net investment spread results. The figure was higher than our estimate of $735.8 million.
Corporate and Other incurred an adjusted operating loss of $490 million, narrower than a loss of $653 million reported a year ago. This lower loss primarily reflects lower expenses, driven by the absence of a restructuring charge in the prior year.
Capital Deployment
Prudential Financial managed to return capital of $720 million to its shareholders in the form of share repurchases worth $250 million and dividends worth $470 million in the fourth quarter.
PRU's board has authorized the repurchase of up to $1 billion of outstanding shares during the period from Jan. 1, 2025 through Dec. 31, 2025. The board of directors authorized a 4% increase in the quarterly cash dividend of $1.35 per share. The dividend will be paid out on March 13 to shareholders of record at the close of business as of Feb. 18, 2025. This marks the 17th consecutive year of dividend increase.
Financial Update
PRU exited the fourth quarter with cash and cash equivalents of $18.5 billion, which decreased 4.7% from 2023-end. Total debt balance of $20.1 billion increased 3.2% from 2023-end.
As of Dec. 31, 2024, Prudential Financial’s assets under management and administration increased 3.3% year over year to $1.69 trillion. Adjusted book value per common share, a measure of the company’s net worth, was $95.82, which decreased 0.8% year over year. Operating return on average equity was 12.2% in the fourth quarter, which improved 150 basis points year over year.
Full-Year Update
For 2024, the adjusted operating income of Prudential Fianancial was $12.62 per share. The bottom line increased 6% from the 2023 figure. The bottom line missed the Zacks Consensus Estimate by 4.7%. Revenues for the year totaled $68 billion, which increased 35% from the 2023 level. The top line missed the Zacks Consensus Estimate by 1.6%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Prudential has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Prudential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Prudential belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, Everest Group (EG), has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
Everest Group reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +26.7%. EPS of -$18.39 for the same period compares with $25.18 a year ago.
For the current quarter, Everest Group is expected to post earnings of $7.39 per share, indicating a change of -54.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -34.3% over the last 30 days.
Everest Group has a Zacks Rank #5 (Strong Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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