Prudential Financial Lags Industry, Trades at a Discount: Time to Hold?

Shares of Prudential Financial Inc. PRU have lost 6.4% in the past year, underperforming the industry’s growth of 0.9%.
The insurer has a market capitalization of $36.40 billion. The average volume of shares traded in the last three months was 1.9 million.

PRU Shares are Affordable

PRU shares are trading at a price to forward 12-month earnings of 7.06X, lower than the industry average of 8.86X, the Finance sector’s 16.47X and the Zacks S&P 500 Composite’s 22.52X. Its pricing, at a discount to the industry average, gives a better entry point to investors. Also, it has a Value Score of A. 

Shares of other insurers like Horace Mann Educators Corporation HMN and CNO Financial Group, Inc. CNO are trading at a multiple higher than the industry average, while shares of MGIC Investment Corporation MTG are trading at a discount to the industry average.

Growth Projections for PRU are Encouraging

The Zacks Consensus Estimate for Prudential Financial’s 2026 earnings per share indicates a year-over-year increase of 1.8%. The consensus estimate for 2027 earnings per share and revenues indicates a rise of 6.4% and 2.7%, respectively, from the corresponding 2025 estimates.

Target Price Reflects Potential Upside

Based on short-term price targets offered by 15 analysts, the Zacks average price target is $115.27 per share. The average indicates a potential 10.1% upside from the last closing price.

Key Points to Note

Prudential Financial is witnessing huge demand for retirement benefit products for baby boomers, which is expected to continue. The U.S. Census Bureau projects that nearly 25% of the population will be 65 years or older by 2050. PRU’s vast distribution network, compelling product portfolio and superior brand image will give it a competitive edge. The company intends to be a global leader in expanding its access to investment, insurance and retirement security. 

It undertakes several strategic initiatives, which position it well for long-term growth. It continues to invest in the long-term sustainable growth of the business through programmatic acquisitions and partnerships in emerging markets to build scale and complement businesses in support of long-term growth. 

Prudential Financial has a strong international presence that gives it more organic growth opportunities than its peers. Expanding its international business is vital for long-term growth. PRU has a strong footprint in Japan, which offers attractive opportunities to capitalize on protection products and retirement needs and has historically generated ROE in the 20% range. Its business in Brazil has gained sufficient scale and should become an important contributor to earnings growth in the international division over the next few years. It has also expanded in Malaysia, which is an attractive market with low life insurance penetration, a well-developed regulatory environment and long-term growth potential.

PRU has been increasing its dividend for the past 16 years. The company continues to balance investments for the growth of businesses, along with returning capital to shareholders.

Conclusion

Prudential Financial continues to benefit from its solid asset-based businesses, improved margins in the Group Insurance business and international operations. A high-performing asset management business and deeper reach in the pension risk transfer market are catalysts for long-term growth.  

Prudential Financial’s exposure to products like annuities and universal life, which guarantee minimum return, will strain its capital. Its results have been suffering due to additional reserve accretion required when low interest rates increase the value of these liabilities. The company expects individual annuities sales to continue to be lower in the near term due to the repricing and repositioning of products. Lower sales reflect its pivot to less market-sensitive products. 

PRU has a VGM Score of B. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers. 

Optimistic analyst sentiment, solid growth projections and attractive valuations should continue to benefit Prudential Financial over the long term. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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