Prudential Financial, Inc. PRU is set to report third-quarter 2015 results on Nov 4, after the market closes. Last quarter, the company posted an earnings surprise of 18.3%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Past Quarter
We believe that Prudential’s U.S. Group insurance business might report weak results for the quarter to be reported as poor disability margins pressure earnings. Though the company has started increasing rates in the disability block, recovery is expected to be quite slow.
In the Group Insurance business, we expect the third-quarter results to be weighed down by limited wage inflation and intense competition. This, in turn, is likely to affect the company’s top line.
As the interest rates in the U.S. continue to be in the low range, the company’s investment income is expected to come in lower figures, primarily for investments in fixed maturity securities and commercial mortgage loans.
However, acquisition of the Individual Life Insurance business of The Hartford Financial Services Group in Jan 2013 is expected to continue generating higher premium revenues through expanded product offerings in the quarter to be reported.
Prudential’s Retirement segment is also likely to have benefited from the company’s penetration in the pension risk transfer business.
Earnings Whispers
Our proven model does not conclusively show that Prudential is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Prudential has a -0.41% Earnings ESP. This is because the Most Accurate estimate stands at $2.43 per share while the Zacks Consensus Estimate stands higher at $2.44 per share.
Zacks Rank: Prudential holds a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, an ESP of -0.41% makes surprise prediction difficult.
Stocks to Consider
Here are some companies from the insurance space that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
Markel Corp. MKL has an Earnings ESP of +1.77% and a Zacks Rank #2.
Cigna Corp. CI has an Earnings ESP of +1.38% and a Zacks Rank #3.
RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +1.55% and a Zacks Rank #2.
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