The stock of Prudential Financial (NYSE: PRU) has shown strong performance so far this year, gaining roughly 13% compared to the 9% rise in the S&P500 index. At its current price of $117 per share, it is trading 8% above its estimated fair value of $108, according to Trefis. However, the stock’s performance has not been consistent, with returns of 39% in 2021, -8% in 2022, and 4% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. It has been challenging for individual stocks to consistently outperform the S&P 500 in recent years, even for heavyweights like JPM, V, and MA.
The insurance giant reported total revenues of $15.1 billion in the fourth quarter of 2023, up 12% year-over-year, primarily due to a decrease in net realized investment losses. Premiums increased by 7% year-over-year, while net investment income and asset management fees also saw gains. This led to an adjusted net income of $1.3 billion, compared to a loss of -$52 million in the year-ago period. The premiums, which contribute close to 50% of the top line, benefited from growth in the institutional retirement strategies category. Total benefits and expenses marginally decreased in the quarter.
In FY 2023, Prudential Financial’s top-line declined by 5% year-over-year to $53.98 billion, mainly due to lower premium figures, partially offset by higher asset management fees, commissions & other income, and net investment income. Net realized losses also decreased from $4.5 billion to $3.6 billion. Total benefits and expenses witnessed a favorable drop, leading to an adjusted net income of $2.5 billion versus -$1.65 billion in the previous year. Looking ahead, the company is forecasted to have revenues of around $53.5 billion in FY 2024, with an annual GAAP EPS of approximately $9.06.
With the current uncertain macroeconomic environment characterized by high oil prices and elevated interest rates, there is speculation as to whether Prudential Financial could face a situation similar to 2023 and underperform the S&P 500 in the next 12 months. However, Trefis’ High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the benchmark index each year. As a group, HQ Portfolio stocks have provided better returns with less risk, presenting a less volatile investment option. The Q1 results for Prudential Financial are expected to follow a similar trend, with revenues forecasted to remain around $53.5 billion in FY 2024 and an annual GAAP EPS of $9.06.
Overall, Prudential Financial’s stock performance has been strong so far this year, outperforming the S&P 500 index. The company’s financial results for the fourth quarter of 2023 showed positive growth in revenues and net income, driven by improvements in premiums, net investment income, and asset management fees. Looking ahead to FY 2024, Prudential Financial is expected to maintain steady revenues and earnings, with a P/E multiple of 12x leading to a valuation of $108 per share. Investors are advised to consider the company’s performance in previous years and the current macroeconomic conditions before making investment decisions.
