Prudential Financial (PRU) Q2 Earnings: Is a Beat in Store?

Prudential Financial (NYSE:PRU) is slated to report second-quarter 2018 results on Aug 1 after the market closes. Last reported quarter, the company delivered a positive earnings surprise of 3.01%.

Prudential Financial (PRU) Q2 Earnings: Is a Beat in Store?

Why a Likely Positive Surprise?

Our proven model clearly shows that Prudential Financial has the right combination of the following two key ingredients to beat estimates this earnings season.

Earnings ESP: Prudential Financial has an Earnings ESP of +0.06%. The positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Prudential Financial, Inc. Price and EPS Surprise

Prudential Financial (PRU) Q2 Earnings: Is a Beat in Store?

Zacks Rank: Prudential Financial holds a Zacks Rank #2 (Buy), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) along with a positive Earnings ESP have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

Prudential Financial is expected to have witnessed bottom-line growth in the soon-to-be-reported quarter owing to recurring premium sales, expanded product offerings and broader distribution capabilities. Also, share buyback might have boosted this bottom-line upside.

Moreover, possibility of solid core growth in asset-based businesses including Investment Management, Retirement as well as Individual Annuities along with better-than-expected margins in the Group Insurance segment and consistent underlying results in international operations have likely contributed to the probable improvement.

Further, lower tax rate might have positively impacted the company’s bottom line. In fact, the Zacks Consensus Estimate for earnings in the quarter to be reported is pegged at $3.08 per share, reflecting a significant year-over-year surge of 47.4%.

The company expects a better-than-expected core performance of its overall businesses in the yet-to-be-reported quarter, mainly on the back of higher fees in its Annuities and Investment Management segments and sustained business growth in International Insurance.

With respect to Total International Insurance segment, the company is estimated to have displayed a solid performance on probable higher contributions from Life Planner and Gibraltar Life and Other operations.

Prudential’s Retirement segment is anticipated to benefit from the company’s penetration and leadership in the pension risk transfer (PRT) business.

Prudential Financial is projected to gain from a gradually improving interest rate environment and a favorable investment income from higher invested asset balances.

The company is likely to experience a top-line rise in the to-be-reported quarter, mainly aided by the possible increase in premiums, investment income, policy charges and fee income. The Zacks Consensus Estimate for the metric is pegged at $14.2 billion, translating into an 8.9% gain on a year-over-year basis.

However, the company has likely witnessed escalated expenses, mainly due to higher insurance and annuity benefits, interest expense as well as general and administrative expenses. This in turn, might restrict the operating margin expansion, hurting the company’s overall performance in turn.

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