Will Prudential (PRU) Disappoint This Earnings Season? - Analyst Blog

Prudential Financial Inc. PRU is set to report first-quarter results after the market closes on May 7. In the last reported quarter, the company's missed the Zacks Consensus Estimate by 1.4%. Let's see how things are shaping up for this announcement. 

 

Factors to Influence First Quarter Results

 

We remain watchful of Prudential's U.S. Group insurance business as poor disability margins put pressure on results. We believe that bad weather will result in higher-than-expected claim costs for the company, thereby draining the bottom line. 

 

Prudential's exposure to products like annuities and universal life, which guarantees minimum return and stricter capital standards, will also likely keep its capital under strain.  

 

A low interest rate environment is also expected to strain the company's investment income.

 

Nevertheless, Prudential's niche market position, strong brand name, vast agent network, extensive international business and the recent acquisition of Hartford Individual Life Insurance are expected to drive earnings.  

 

Earnings Whispers?

 

Our proven model does not conclusively show that Prudential is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here as you will see below. 

 

Zacks ESP:  With the Most Accurate estimate pegged at $2.25, which is lower than the Zacks Consensus Estimate of $2.27, the Zacks ESP translates into -0.88%. 

 

Zacks Rank: Prudential's Zacks Rank #3 (Hold) increases the predictive power of ESP, but when combined with a -0.88% ESP surprise prediction becomes difficult. We caution against stocks with Zacks #4 and 5 Rank (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision.

 

Other Stocks to Consider

 

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

 

Cherry Hill Mortgage Investment Corp. CHMI earnings ESP of 7.8% and Zacks Rank # 2 (Buy). 

 

Diamondrock Hospitality Co. DRH, earnings ESP of 14.3% and Zacks Rank # 3.

 

Stifel Financial Corp. SF, earnings ESP of 1.43% and Zacks Rank # 3.