Will Prudential Financial (PRU) Earnings Surprise in Q3?

Prudential Financial Inc. (PRU) is scheduled to report third-quarter 2014 results on Nov 5 after the market close.

In the last quarter, this life insurer delivered a 5.7% positive earnings surprise. The average beat for the trailing four quarters is 12.6%.

Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q3 Results

We believe revenue growth in Prudential’s group business will be restricted by sluggish employment trends, limited wage inflation, and low persistency in the disability line.

Also a soft interest rate environment rate will keep investment income under pressure. Reinvestment yields primarily for investments in fixed maturity securities and commercial mortgage loans will remain low.

However, Prudential Financial’s results will benefit from strong earnings from its international operations courtesy of the recent acquisitions of Hartford’s life block, GM pension block and Star Edison.

Prudential Financial’s intelligent capital management in the form of share buyback will also drive the company’s bottom line.

Earnings Whispers

Our proven model does not conclusively show that Prudential Financial 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: Prudential Financial’s Most Accurate estimate is pegged at $2.40 per share, which is below the Zacks Consensus Estimate of $2.41. The Earnings ESP is thus -0.42%.

Zacks Rank: Prudential Financial has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of -0.42% makes surprise prediction difficult.

Stocks to Consider

Here are some 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:

MFA Financial, Inc. (MFA) has an Earnings ESP of +5.26% and Zacks Rank #1 (Strong Buy).

Navigators Group Inc. (NAVG) has an Earnings ESP of +10.19% and a Zacks Rank #2 (Buy).

American International Group, Inc. (AIG) has an Earnings ESP of +0.93% and a Zacks Rank #2.