Shares of Prudential Financial Inc. PRU have gained 15.5% in the past three months, outperforming the industry’s growth of 10.4%.
The rally has been supported by a stronger-than-expected first-quarter earnings performance, improving investment income and favorable investor sentiment toward the financial sector. An attractive valuation has also drawn investor interest, while the company's earnings beat and solid capital position have driven valuation multiple expansion. The insurer has a solid track record of beating earnings estimates in three of the past four quarters and missing in one, with an average of 9.3%.
Shares of Assurant, Inc. AIZ, CNO Financial Group, Inc. CNO and Enact Holdings, Inc. ACT have gained 23.7%, 20.9% and 8.8%, respectively, in the past three months.
3-Month Price Performance: PRU, AIZ, ACT, CNO & Industry
Image Source: Zacks Investment Research
PRU’s Valuation
Shares of Prudential Financial are trading at a discount compared to the industry. Its shares are currently trading at a price-to-earnings multiple of 8.04X, which is lower than the industry average of 8.27X, the Finance sector’s 16.45X and the Zacks S&P 500 Composite’s 21.05X. The insurer has a Value Score of A.
Image Source: Zacks Investment Research
Shares of Assurant, Enact Holdings and CNO Financial are trading at a multiple higher than the industry average.
Efficient Use of Shareholder Capital
Prudential Financial’s trailing 12-month return on equity of 16.3% compared favorably with the industry’s 16.1 %, reflecting the company’s efficiency in utilizing shareholders’ funds.
Key Points to Note
Retirement Strategies continues to deliver strong growth. Strong demand for annuity and retirement products continues to drive record sales, supported by the company's broad distribution network, diverse product portfolio and ongoing product innovation. Management remains optimistic about growth opportunities in the pension and longevity risk transfer markets in the United States and Europe. Higher assets under management, fee income and spread-based earnings are expected to support long-term earnings growth.
Higher investment income remains a key earnings driver. Prudential continues to benefit from reinvesting maturing assets at higher yields, expanding investment spreads and boosting earnings across its United States and International insurance businesses.
Prudential is transforming into a more diversified and capital-efficient insurer. The company is leveraging its life insurance business to cross-sell retirement, asset management and workplace benefits, while expanding fee-based, wealth transfer and protection solutions. Favorable mortality trends, lower claim severity in Group Insurance and disciplined underwriting continue to support margin expansion and stable earnings.
The company undertakes several strategic initiatives that, position 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 has a strong international presence that provides more organic growth opportunities than its peers. Expanding its international business is vital for long-term growth. Prudential continues to benefit from its strong presence in Japan, where demand for protection and retirement solutions supports attractive returns. The company is also expanding in high-growth markets such as Brazil and Malaysia, positioning its international business to drive premium growth, diversify earnings and support long-term profitability.
The company continues to return capital through consistent dividend increases and share repurchases while allocating investments toward higher-return businesses. Combined with expense discipline and continued product innovation, these efforts are expected to enhance earnings quality and drive long-term value creation.
Growth Projections for PRU
The Zacks Consensus Estimate for Prudential’s 2026 revenues is pegged at $58.53 billion, implying a year-over-year improvement of 1.5%. The estimate for 2026 earnings per share (EPS) is pinned at $13.80 per share, implying a year-over-year decline of 4.4%. The consensus estimate for 2027 EPS and revenues indicates an increase of 6.2% and 1.7%, respectively, from the corresponding 2026 estimates.
The Zacks Consensus Estimate for 2026 earnings has moved up 0.8%, while the estimates for 2027 earnings have declined 1.2%, over the past 60 days.
Risks for PRU
The biggest near-term headwind remains the voluntary sales suspension at Prudential of Japan following compliance issues. Management expects the suspension to reduce 2026 pretax adjusted operating income by $525-$575 million. Additionally, with significant operations in Japan and other international markets, unfavorable currency movements could reduce reported revenue and earnings.
Weak equity markets could reduce assets under management and fee income at PGIM, while geopolitical instability may increase market volatility, pressure investment performance and weigh on Prudential's financial strength and earnings.
Conclusion
Prudential continues to benefit from its retirement growth, solid asset-based businesses, improved margins in the Group Insurance business and international operations. A high-performing asset management business, improving investment income and solid capital position are catalysts for long-term growth. However, Japan-related issues, geopolitical tensions and market volatility remain risks.
Coupled with higher return on equity and attractive valuations, therefore, it is wise to retain this Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Prudential Financial, Inc. (PRU): Free Stock Analysis Report
CNO Financial Group, Inc. (CNO): Free Stock Analysis Report
Assurant, Inc. (AIZ): Free Stock Analysis Report
Enact Holdings, Inc. (ACT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).