Prudential (PRU) To Report Q2 Earnings: What's In The Cards?

Prudential Financial, Inc. (NYSE:PRU) is slated to report second-quarter 2019 results on Jul 31, after market close. The company delivered a negative earnings surprise in the last reported quarter.

Factors to Consider

Prudential’s second-quarter results are likely to benefit from growth in asset-based businesses, improved margins in Group Insurance business, solid international operations and deeper reach in the pension risk transfer market.

The retirement business is expected to generate improved risk-adjusted returns, specifically with less competition, improved risk profile and leadership in the pension risk transfer business.

Growing Japan business, leadership position in Japan life insurance market and businesses in Brazil, Chile, Indonesia, India, China and Africa should continue to benefit International Insurance segment.

U.S. Financial Wellness is likely to benefit from advice, investment, and retirement income and protection solutions, thus aiding full-service retirement plan sales and Group Insurance sales.

PGIM is likely to benefit from a significant pool of assets and a strong balance sheet.

An improved interest rate environment and broader invested asset base should drive investment results.

Revenues are likely to benefit from increase in recurring premium sales, expanded product offerings, broader distribution capabilities, investment income, policy charges as well as fee income. The Zacks Consensus Estimate for revenues is pegged at $13.6 billion, indicating an increase of 4.5% from the year-ago reported figure.

However, expenses are likely to increase attributable to higher policyholders’ benefits, amortization of deferred policy acquisition costs as well as general and administrative expenses and weigh on operating margin.

Nonetheless, lower share count owing to buybacks is likely to provide a boost to the bottom line. The Zacks Consensus Estimate for earnings per share is pegged at $3.22, indicating nearly 7% increase from the year-ago period reported figure.

What Our Quantitative Model States

Our proven model does not conclusively show that Prudential Financial is likely to beat on earnings this season. This is because a stock needs to have the right combination of a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along and a positive Earnings ESP. But this is not the case as you can see below.

Earnings ESP: Prudential Financial has an Earnings ESP of -1.01%. This is because the Most Accurate Estimate of $3.19 is lower than the Zacks Consensus Estimate of $3.22. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Prudential Financial, Inc. Price and EPS Surprise

Zacks Rank: Prudential Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the insurance industry with the perfect mix of elements to surpass estimates this time around are as follows:

Lincoln National (NYSE:LNC) is set to report second-quarter earnings on Jul 31. It has an Earnings ESP of +0.71% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hartford Financial Services Group (NYSE:HIG) is set to report second-quarter earnings on Aug 1. It has an Earnings ESP of +0.54% and a Zacks Rank of 3.

American Financial Group (NYSE:AFG) is set to report second-quarter earnings on Aug 6. It has an Earnings ESP of +0.66 and a Zacks Rank of 3.

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