Prudential Insurance has been hit hard by the Japanese tsunami and its aftermath. It is trading near 52 week lows after dropping around 20% since the earthquake in Japan. Prudential is being unfavorably punished and could wind up being a great long term bargain.
Prudential Financial, Inc. (PRU), through its subsidiaries, offers various financial products and services in the United States, Asia, Europe, and Latin America. The company operates through three divisions: The U.S. Retirement Solutions and Investment Management, The U.S. Individual Life and Group Insurance, and The International Insurance and Investments. The U.S. Retirement Solutions and Investment Management division provides individual variable and fixed annuity products, as well as offers retirement investment and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors.
5 Reasons to own Prudential at $54 a share:
- Prudential added to its exposure to Japan by buying AIG’s life insurance operations there in February. The timing was horrible given it was one month before the Tsunami and its aftermath. However, this move should pay off in the long run:
- Retirees in Japan (PRU’s primary customers for its annuities and life insurance) are expected to one third of the population by 2030;
- The Japanese have $10T in low yielding savings accounts;
- They have enjoyed double digit growth in Japan for 7 quarters;
- Japan now makes up nearly 40% of Prudential’s net income.
- PRU is hovering just over long term technical support of $50 to $52 a share (See Chart)
- PRU has crushed earnings estimates the last four quarters and consensus estimates for 2011 and 2012 have risen significantly over the past three months.
- Prudential has an A rated balance sheet, yields 2.1% and sells at 8 times this year’s projected earnings and less than 7 times 2012’s expected EPS.
- PRU is priced significantly under analysts’ price targets. S&P’s price target on PRU is $75 as does Credit Suisse. UBS is at $77 on Prudential.