Weak performance

Prudential Financial’s (PRU) stock has risen by 16% in the past six months, mainly due to expectations of improved fundamentals and higher investment and underwriting income.

Prudential’s operating income was impacted by higher reserve development, losses in Individual annuities, and lower US insurance revenue in 2Q16. Its International Insurance business was boosted by strong underwriting margins in the quarter.

Prudential’s Valuations Are Weak on 2Q16 Operating Performance

Prudential saw inflows rise in Asset Management and Retirement for 2Q16. The company made structural changes to manage the risks in its individual annuities business, which reduced complexity, enhanced overall capital flexibility, and facilitated an increase in 2016 share repurchase authorization as a result of capital released.


Prudential Financial is an insurance organization with an emphasis on generating risk-adjusted returns for shareholders. Insurance businesses are generally valued on the basis of their book values. Prudential Financial is currently trading at a one-year forward price-to-book multiple of 0.7x. Its peers are trading at an average of 1.0x.

At its current price-to-book multiple of ~0.9x, Prudential Financial is trading cheaper than other insurers such as Allstate (ALL), ACE (ACE), and Chubb (CB). However, Prudential is trading at a premium compared to major players such as AIG (AIG) and Metlife (MET). Both are trading at ~0.8x.

Prudential Financial is trading at 7.3x on a one-year forward price-to-earnings basis, compared to the industry average of 8.8x for the same period. The stock is currently trading even lower than its book value.

The company’s diversified line of business, prudent capital management, deleveraging, multiyear high liquidity and cash flows, capital returns to shareholders, and aggressive buyback programs have instilled confidence and suggest that the stock is undervalued. Prudential’s focus on the Retirement segment will be beneficial as more Baby Boomers enter retirement. The expected rise in interest rates could also boost the company’s investment management revenue.

Investors can gain exposure to insurance companies by investing in financial sector ETFs such as the Financial Select Sector SPDR ETF (XLF).

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.