Prudential Financial Is Worth A Look

Dec. 10, 2018 2:56 AM ETPrudential Financial, Inc. (PRU)20 Comments
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  • Prudential Financial recently held its 2019 investor outlook call.
  • Management guided for the company to have a strong(ish) 2019 and, more importantly, PRU shares are dirt cheap based on several key metrics.
  • I am long Prudential Financial and I may get longer in the near future.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Prudential Financial (NYSE:PRU) recently held its annual investor outlook call and, in my opinion, there was a lot to like about what management had to say. Not only did management project for Prudential to have a strong 2019 but they also announced a meaningful addition to the insurer's buyback program ($2B).

PRU shares have not performed well so far in 2018, so the positive takeaways from the investor outlook call should be welcomed news.

ChartPRU data by YCharts

With shares down almost 25%, I believe that Prudential is worth a look, of course, if you are willing (and able) to hold onto the position for at least the next two to three years.

A Strong(ish) 2019

During the 2019 investor outlook meeting, management guided for Prudential to earn $12.50 to $13.00 per share next year.

Source: 2019 Financial Outlook Conference Call Presentation

The guidance was strong almost across the board, as management guided for a double-digit adjusted ROE number in 2019, in addition to a free cash flow ratio in the mid-60% range. Additionally, the board authorized $2B to be added to the buyback program (represents approximately 5% of the total market cap).

Source: 2019 Financial Outlook Conference Call Presentation

An above-10% adjusted ROE is impressive, but more importantly, Prudential's businesses appear to be well-positioned for 2019 and beyond.

Source: 2019 Financial Outlook Conference Call Presentation

The insurer's diversified business should benefit from several tailwinds if the economy continues to improve, but even without an improving backdrop, management has levers to pull. For example, the company's PGIM division should be able to leverage the large amount of assets under management (over $1T) if difficult times come over the next few quarters.

Source: Q3 2018 Earnings Presentation

Looking back, Prudential's Q3 2018 results were nothing to brag about (missed the consensus earnings

ChartPRU P/E Ratio (TTM) data by YCharts

This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long PRU. 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.

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