We expect Prudential Financial Inc. PRU to beat expectations when it reports second-quarter 2015 results on Aug 5, 2015.
Why a Likely Positive Surprise?
Our proven model shows that Prudential Financial is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.41%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: Prudential Financial carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings.
The Sell-rated stocks (Zacks Ranks #4 and 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.
The combination of Prudential Financial’s Zacks Rank #3 and 0.41% ESP makes us confident of an earnings beat this season.
What is Driving the Better-Than-Expected Earnings?
Solid international presence along with high return from the Japanese business is likely to have a positive impact on Prudential Financial’s second-quarter earnings. Moreover, the company’s top market position in the pension risk transfer business is expected to boost the top line and hence, earnings.
Additionally, Prudential Financial has been consistently lowering its share count via share repurchases. This too is expected to bolster earnings in the quarter to be reported.
However, a soft interest rate environment is anticipated to keep investment income under pressure. Moreover, an underperforming group disability business and regulatory control are other dampeners.
Other Stocks to Consider
Prudential Financial is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three companies from the finance sector:
Primerica, Inc. PRI with an Earnings ESP of +2.15% and a Zacks Rank #2 (Buy).
American Capital, Ltd. ACAS with an Earnings ESP of +8.70% and Zacks #2 Rank.
American Financial Group Inc. AFG with an Earnings ESP of +6.61% and a Zacks Rank #3.
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