Prudential Shares Hit 52-Week High (CI) (CNO) (HIG) (PRU)

On May 16, 2013, shares of Prudential Financial, Inc. (PRU) hit a 52-week high of $68.45. The momentum was driven by a strong first quarter, which included a 20.6% positive surprise, rating affirmation, and successful closure of the acquisition of life insurance business of The Hartford Financial Services Group Inc. (HIG).

Prudential reported first-quarter 2013 earnings on May 1. Adjusted operating earnings came in at $2.28 per share, higher than the Zacks Consensus Estimate of $1.89. Results also exceeded the year-ago earnings of $1.61 per share.

Prudential reported net loss of $1.55 per share in the first quarter of 2013, which was narrower than the prior-year loss of $2.03.

Recently A.M. Best Co. reiterated the issuer credit ratings (ICR) of ‘a-’ on Prudential. Concurrently, the rating agency reiterated the financial strength rating (FSR) of A+ (Superior) and ICR of ‘aa-’ of the domestic life/health insurance subsidiaries of Prudential. It also affirmed the debt ratings. Outlook remained stable.

Prudential also completed the purchase of Hartford Financial’s individual life block and two significant pension risk transfer transactions. The acquisition will help Prudential to acquire a place among the top five largest individual life insurance companies in the U.S. in terms of new recurring premium sales. Prudential will also acquire leadership positions in universal, term and variable life insurance.

Additionally, valuation for Prudential looks fair. Though the shares are trading at a discount to the peer group average both on a price-to-book basis and on a forward price-to-earnings basis, return on equity is lower than the peer group average. Nevertheless, the 1-year return on the stock is 30.5%, much above the S&P’s return of 17.6%.

Prudential carries a Zacks Rank #2 (Buy).

Other stocks within our coverage CIGNA Corp. (CI) and CNO Financial Group, Inc. (CNO) both carrying Zacks Rank #2 (Buy) are worth considering.