What To Expect From Prudential’s Q1 Results

Prudential Financial (NYSE:PRU) is scheduled to release its first quarter earnings on Wednesday, May 3rd. In Q4 2016, the company’s revenue increased 1% year-over-year (y-o-y) to over $13.4 billion, driven by a 11% surge in net investment income and strength in its U.S. retirement solutions and investment management business. This also helped the company increase its adjusted operating earnings by about 22% y-o-y to $1.1 billion or $2.46 a share in Q4 2016, which beat analysts’ estimates of $2.32 a share.

In the upcoming Q1 results, we expect Prudential’s revenues to decrease in double digits and earnings to rise by about 20%, in line with consensus estimates compiled by Reuters.

Factors Driving Results:

• Interest rates: Interest rates were low last year but have slightly improved over the last three months. In 2016, Prudential’s net investment income grew by 6%, even though its net investment income yield declined by 4 basis points to 3.78%. This was due to a slight decline in investment yield on both the fixed maturity securities as well as mortgage loans.
  
• Strong Yen: We expect the company’s results to be positively impacted by a slightly stronger Japanese Yen, considering Japan contributes about 40-45% of the company’s international premiums. International markets contributed about 40% of Prudential’s revenues and 60% of its operating income last year.

See our full analysis of Prudential

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