Look For More Upside In Prudential Financial

Jun.18.13 | About: Prudential Financial, (PRU)

While the financial stocks have seen their share of ups and downs recently, Prudential Financial (NYSE:PRU) is up 45% in the past year with nearly 37% coming since April 2013. According to projected earnings, Prudential still has an additional 18% of upside in capital appreciation in the next year. Earnings per share were up nearly 50% compared to a year earlier.

Prudential Financial, Inc., through its subsidiaries, provides a range of insurance, investment management, and other financial products and services to both individual and institutional customers in the United States and internationally.

On a reported basis, common stock earnings per share amounted to $2.28 for the first quarter, based on after-tax adjusted operating income of the financial services businesses. This compares to EPS of $1.61 a year ago. After adjusting for market-driven and discrete items in both the current quarter and the year-ago quarter, EPS was up 49%, amounting to $2.13 compared to $1.43.

This increase is largely the result of:

  • the underlying organic growth in the U.S. businesses over the past year;
  • the first full-quarter contribution from the pension risk transfer business was put on the books in the fourth quarter;
  • the initial contribution from the in-force Individual Life Insurance business acquired from The Hartford in January;
  • continued growth of the International Insurance business;
  • and finally, a more favorable claims experience across several businesses.

Earnings improvements were broadly based and were supported by strong sales and flows. The landmark pension risk transfer transactions completed in last year's fourth quarter contributed to record quarterly results in Prudential's Retirement business. The Individual Life Insurance business of Hartford that was acquired in January is contributing to results in line with expectations. International Insurance performed exceptionally well, with record earnings and strong sales across multiple distribution channels.

Prudential Financial, Inc. recently announced that its Board of Directors has authorized the repurchase of up to $1.0 billion of its outstanding Common Stock during the period from July 1, 2013, through June 30, 2014.

In June 2012, the Board authorized the repurchase of up to $1.0 billion of its outstanding Common Stock through June 30, 2013. The company has repurchased approximately $150 million of its Common Stock through March 31, 2013, under that authorization.

Prudential Financial announced the declaration of a quarterly dividend of $0.40 per share of Common Stock, payable on June 20, 2013, to shareholders of record at the close of business on May 29, 2013. The stock has a current dividend yield of 2.26% with an annual dividend of $1.60.

Prudential Financial has a 12-month target price of $85 based on the shares will trade at 10.1 times the forward four-quarter operating EPS estimate of $8.43

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.