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PRU Stock Lags Industry, Trades at a Discount: Time to Hold?
Shares of Prudential Financial Inc. PRU have lost 3.5% in the past month compared with the industry’s fall of 1.5%.
PRU's recent decline reflects a pullback from its 52-week high of $127.72, along with broader financial-sector weakness and market volatility amid higher yields. However, higher yields can support investment income over time. Strong retirement and annuity demand, higher spread income and solid PGIM performance positioned it for further growth.
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Shares of some of its peers, such as CNO Financial Group, Inc. CNO and Enact Holdings, Inc. ACT, have gained 1.3% and 0.2%, respectively, while Assurant, Inc. AIZ has declined 0.1% in the past month.
PRU’s Valuation
Shares of Prudential FinancialPRU-- are currently trading at a price-to-earnings multiple of 8.01X, which is lower than the industry average of 9.09X. The insurer has a Value Score of A.
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Shares of Assurant, Enact Holdings and CNO Financial are trading at a multiple higher than the industry average.
Efficient Use of Shareholder Capital
Prudential Financial’s trailing 12-month return on equity of 16.7% compared favorably with the industry’s 16.6 %, reflecting the company’s efficiency in utilizing shareholders’ funds.
Growth Projections for PRU
The Zacks Consensus Estimate for Prudential’s 2026 revenues is pegged at $58.95 billion, implying a 2.2% year-over-year improvement. The 2026 earnings per share (EPS) estimate is pegged at $14.51 per share, implying a 0.6% year-over-year increase.
The consensus estimate for 2027 EPS and revenues indicates an increase of 2.9% and 2.1%, respectively, from the corresponding 2026 estimates. The expected long-term earnings growth is pegged at 4.6%.
Optimistic Analyst Sentiment on PRU
The company has witnessed five upward revisions for 2026 earnings estimates over the past 30 days, against no movement in the opposite direction. For 2027, it has witnessed four upward revisions, against one downward movement. Thus, the Zacks Consensus Estimate for 2026 earnings and 2027 estimates have moved up 2.4% and 1.2%, respectively, over the same time frame.
Key Points to Note for PRU
Prudential continues to benefit from growing demand for retirement-income and pension risk transfer solutions. Retail annuity sales increased 14% year over year to $3.6 billion in the second quarter, while retail annuity account values rose more than 30%. Continued demand for guaranteed retirement income should support premium and spread income growth. The company also continues to target the roughly $3 trillion U.S. corporate pension market and plans to extend its pension risk transfer expertise into Europe.
Prudential's U.S. protection businesses are gaining momentum, with Group Insurance AOI rising 24% year over year to $155 million and Individual Life sales reaching a record $237 million. Strong performance in these businesses should support earnings growth and diversify revenues beyond annuities and asset management.
Higher investment income remains a key earnings driver. Prudential continues to benefit from reinvesting maturing assets at higher yields, expanding investment spreads and boosting earnings across its United States and International insurance businesses.
PGIM remains an important growth driver, with second-quarter operating income increasing 28% year over year. Higher asset-management fees, strong investment performance and continued third-party inflows are supporting the segment. Prudential also aims to significantly increase PGIM's contribution to overall earnings.
Prudential's international presence supports diversification, with Japan and Europe remaining key retirement and protection markets. However, its plan to exit select emerging markets could release more than $3 billion of capital, which can be redeployed toward higher-growth businesses such as PGIM and retirement operations, thereby improving capital allocation and long-term earnings growth.
Prudential is targeting $750 million in pretax run-rate benefits by 2028, significantly above its previous target. The efficiency initiatives should support margins and provide an additional boost to earnings. Management expects these actions to create capacity for reinvestment while improving operating efficiency.
PRU continues to return capital to shareholders through share repurchases and dividends while investing in higher-return businesses. In the first six months of 2026, it repurchased $500 million of shares and paid $989 million in dividends. Strong liquidity, expense discipline and product innovation should support earnings growth and long-term value creation.
Risks for PRU
The biggest near-term headwind remains Prudential of Japan’s voluntary sales suspension following compliance issues. Management expects the suspension to reduce 2026 pre-tax adjusted operating income by $525-$575 million. Additionally, given its significant operations in Japan and other international markets, unfavorable currency movements could reduce reported revenues and earnings.
Prudential plans to exit select emerging markets and redirect more than $3 billion toward higher-priority businesses, including PGIM. However, weakness in U.S. Legacy Products could slow the improvement in earnings quality.
Conclusion
Strong retirement and annuity demand, higher spread income, PGIM growth, cost savings and capital optimization provide multiple avenues for Prudential to sustain earnings growth. International operations, improving investment income, and strong liquidity should support long-term growth. However, Japan-related issues and market volatility remain risks. Yet, a VGM Score of B instils confidence.
Coupled with higher return on equity, favorable estimates, optimistic analyst sentiment and attractive valuations, it is wise to retain this Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Prudential Financial, Inc. (PRU): Free Stock Analysis Report
CNO Financial Group, Inc. (CNO): Free Stock Analysis Report
Assurant, Inc. (AIZ): Free Stock Analysis Report
Enact Holdings, Inc. (ACT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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