Prudential Financial Stock Report: A Prudent Long-Term Approach

The current political and economic changes in the world have made stock picking a complex art. A long-term investor cannot buy stocks with a tunnel vision on growth anymore. You need to carefully assess the growth potential in close correlation with the overall value that it might generate. Increasingly as global economies are aligning themselves, it becomes all the more essential to look at entities that confirm to global challenges for sustained gains. Needless to mention therefore financial stocks across service range throw up some interesting opportunities. One of those prudent long-term approaches would be to go long on Prudential.

The insurance giant, Prudential Financial, has registered stable growth across markets. Apart from US and UK, it also has a significantly commendable presence in many emerging markets across Asia and Africa. The financial services are booming in most of these emerging markets and therefore opens up great opportunities for growth and room for significant value addition. The company is well set to capitalize on the financial boom in these markets to drive up volume and margin expansion.

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The other major advantage is the fact that the global uncertainties have also made a case for more constructive insurance policies. Increasingly more and more companies are looking at proactive policies to woo customers and increase footfall. Prudential Financial has been instrumental in converting these opportunities for greater gains, and that has led to the Prudential stock price rising. As a result, several investors have begun taking a position and betting on the Prudential Financial stock’s long-term growth. However, the recent pullback in the overall Prudential stock price has forced many to take contrarian call.

The question that is important is why is this considered a good point to go long (buy) on Prudential Financial as compared to selling it? So, here is the Prudential Financial complete stock report to answer this questions:

Analyst Recommendation on Buying Prudential Financial Stock

An average investor relies very heavily on brokerage view and recommendation. Brokerages as per recent recommendation are betting big on the stock and therefore it makes sense to go long on Prudential Financial. In fact, 9 of the key global brokerages have now reiterated their Outperform rating on the stock. In fact, the consensus view is that the Prudential stock value will better overall market performance in the same period. They have also advised investors to avoid getting into panic mode and selling the common stock on the back of the recent downturn in prices. Instead, they must take advantage of the situation to either increase position or hold their existing position for now for greater gains going forward.

Moreover, the brokerages have also upped the price target to the north of $1800 level in many cases indicating a nearly 20% room for upside over the near-term. In fact, the highest target price is well over $1900 levels and the lowest around $1250 mark. This goes on to indicate that those investors who already have the common stock, should just wait for the right price to realize profit and many who have not yet taken a position will get to enter the stock at even lower levels perhaps. The median price target comes somewhere close to $1700, indicating close to 7-8% upside in the near-term.

The popular view about the Prudential Financial stock value is that the

  1. Headwinds facing it are set to ease going forward
  2. Prudential Financial can gear up for greater and more pronounced earnings gain
  3. Distinct possibility of Prudential Financial outperforming the financial index and other key market indices
  4. Management has taken several corrective measures than can unleash long-term gains
  5. Prudential Financial heading for robust recapitalization phase with constructive recoup in overall financial performance
  6. Emerging market demand may lead the next phase of growth.

Resistance Breakout on Prudential Financial Stock Price Chart

Deutsche Bank on Prudential Financial

In fact, here are views of some eminent brokerages that explain why it would be prudent to go long on Prudential Financial. Deutsche Bank has put Prudential Financial back on its buy list after a tough year and increased the target to $1590, a massive almost $150 jump from earlier $1385. They believe,

  1. The bad news in terms of muted earnings growth of 8% has already been priced in
  2. The Prudential stock value is well on its way to returning to robust capital position
  3. The shares are at oversold levels prompting them to up the target price
  4. The annual projected earnings rate of 8% is twice the sector growth rate
  5. Management is mindful of the problem and have taken appropriate measures
  6. Corrective measures by management led to a boost in overall growth parameters.

Deutsche reiterated its positive stance on the Prudential Financial stock. They believe the very fact that earnings estimate is almost double that of the sector can be a long-term positive for the Prudential Financial stock. Investor gains could be anywhere between 8-20% depending on the market cycle that they choose to invest in the Prudential Financial stock. The Prudential Financial stock, therefore, promises long-term gains.

Deutsche Bank is buying the Prudential Financial stock.

Jefferies on Prudential Financial

There are some concerns on the earnings front though that might cast doubt in your mind about going long on Prudential Financial. Jefferies importantly have lowered their earnings estimate for the next year and now see EPS closer to $3.19/share levels as compared to $3.36 earlier. But the fact that they have maintained the Hold rating and raised the overall price target to the north of $1450 levels is a boost to sentiment. As per the report, investors can clock gains over long-term even in a lower earnings growth scenario. Additionally, their earnings outlook is pretty much at par with the industry average at the moment.

Several other leading brokerages too like Barclays and BNP Paribas too have reiterated a positive stance on the stock. This is mainly in the back of the overall measures that have been taken by the management to improve growth and rising opportunities. Opportunities for financial firms are rising across Emerging Markets. Prudential Financial has been betting on this space big time and has created a significant presence in markets like India. That no doubt augurs well for the stock’s overall prospects and investors no doubt stand to gain. However, they need to look more towards long-term gains rather than short-term roadblocks.

Jefferies buying the Prudential Financial stock

Investor Activity in Prudential Financial Stock

Another key reason to go long on Prudential Financial is no doubt the hectic institutional investor interest in the stock. While there have been some exits, the Prudential stock is in the most favoured list of many influential institutional investors. It is therefore expected that this stock is well set to realise significant gains going forward, especially in the light of positive economic climate. Some of the notable investor action in the Prudential stock includes:

1) Horizon Investments bought fresh position in Prudential Financial. It is worth more than $700,000 and they raised this stake in the second quarter

2) US Bancorp DE too raised its position in Prudential Financial by 12.1% during the same period. They now own a total of 16,585 shares and the total value of their stake is around $564,000. In the second quarter itself, they bought close to 2000 shares of PLC.

3) Dimensional Fund Advisors also increased their stake in Prudential Financial by 6.6%. Their total stake of close to 1,064,693 shares is now worth $36,210,000.

4) Kayne Anderson Rudnick Investment Management too bought a significant share in Prudential Financial in the second quarter. Their total stake was worth around $3,838,000.

5) That was not all. There are a few more bulls on Prudential Financial still. Mckinley Capital raised their stake by over 4% and their total stock is now valued at $1,405,000. In the second quarter, they bought 1639 shares of the total 41,323 share that they own now.

6) Apart from these key stake buys, hedge funds and other institutional investors together own almost 1.50% stake in Prudential Financial.

These stake buys go on to show that the investment community is more or less gung-ho on the Prudential Financial stock and are looking to stay invested for a while. This can be easily ascertained by the fact that most have increased their position in the company in recent times. As the headwinds of the 2008 Subprime crisis are gradually fading, the Prudential stock is likely to log in growth on the back of robust capital enhancement and improved demand scenario.

Prudential common stock value growth during the last year.

Prudential Financial Overall Profile

An internationally acclaimed financial company, Prudential Financial is known for its global presence and marquee achievements. It has an extensive network of operation across US, Asia and UK. Some of the key areas of excellence and operation includes

  1. Insurance
  2. Asset management
  3. Broker-dealer operation
  4. Some of the most notable arms and sister organizations of this firm include
  5. Eastspring Investments
  6. M&G essentially looks at individual and institutional investment across UK
  7. The United States broker-dealer and asset management
  8. Prudential Financial Capital
  9. Prudential Financial Corporation handles the health insurance, general insurance and overall financial services across Asia
  10. Jackson is mostly involved in retirement income and savings solutions for the US customers

Over the point of time, the company has managed to establish a significantly high level of confidence amongst its clients both in and outside the US. Even in the new target markets, they have been instrumental in providing both value and long-term gains to their customers. As a result, if you plan to go long on Prudential Financial, the credibility of the brand will be a sure plus.

$54.16 billion Prudential Financial revenue in 2014

Earnings Outlook

Earnings no doubt are one of the best indicators of a company’s financial strength. Whatever the market condition might be, the earnings forecast as well as actual earnings bring out the picture very clearly. Investors can then easily assess the company’s fundamentals, strength and weakness and take a stance on the stock accordingly. This is particularly important for stocks where the sectoral trend might not be very clear.

Therefore, the call to go long on Prudential Financial invariably has to include an earnings push.

The most recent numbers indicate that earnings continue their upward movement despite the overall muted sentiment in the market. The company’s earnings per share are set to rise closer to the 130p mark. The price to earnings ratio thus far is also comfortable at 10.45 and does not indicate a potential balance sheet stretch. The price to earnings ratio essentially measures the parity of the business fundamentals and the first indicator of any signs of stretch in the overall balance sheet of the company.

On the whole, the consensus is for a 8% earnings growth. While you can rubbish the sub 10& earnings growth as alarming, the fact is this number is almost double the average sectoral growth at the moment. Revenue for the company is likely to clock in double-digit growth going forward. The assumption is after recording 10% plus revenue growth previous year, the company is well on track to do an encore or slightly less in terms of expanding the revenue collection.

Not only would it directly help improve the operating margins but a higher revenue also indicates better market conditions overall. It signals the demand for the various products and offerings that Prudential Financial currently deals with is steady. Growing revenue is also symptomatic of customer trust in Prudential Financial. The good will they thus generate always enhances overall Prudential stock value appreciation.

The financial sector is just showing signs of stability as it is gradually getting out of the throes of the post-Lehman impact. Therefore investors can easily take heart in the adequate growth potential that these numbers seem to indicate. The earnings data will also give indicators confidence about the sustained growth prospects that Prudential Financial is signaling.

Prudential Financial Earnings


The company has a high dividend yield of 3.35%. If you are long on Prudential Financial, this no doubt is an important as well as an interesting factor. It indicates that the company is on a steady growth path. In fact, after registering 5% plus growth in its dividend payout the previous year, the company is well on its way to see close 7% growth in dividends.

For investors this means the money bags will keep ringing whatever the market scenario might be. Once they have a position in Prudential Financial, it would make sense to hold on to this position to incorporate gains on the investment at regular intervals. The high yield also indicates that growth is on track for this financial company.

Prudential Financial Dividend Histroy


Does it mean, growth will never stop? Not really. Prudential Financial will surely reach a point where the growth will stagnate or the company would have to look at other verticals to drive growth. Until that time they can continue to gain and investors can continue to make money.

While new investors could find slightly lower entry points but existing shareholders should hold on to their stocks. The expectation is that the quantum of gain will be more than adequate if you keep it for the long haul. The rich dividend prospect is also a lucrative aspect.

Overall, therefore, it can be easily concluded that long on Prudential Financial is not just a popular trade but perhaps even a prudent financial decision at the moment. This is particularly relevant given the sustained gains that is expected going forward. Brokerage estimates, earnings forecasts all point to long-term positive returns.

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