Prudential’s mild pullback

The insurer will reveal its first-half numbers on 8 July, and this will be the first interim set of results under the new CEO Mike Wells.

Prudential logo
Source: Bloomberg

When the former CEO of Prudential, Tidjane Thiam, stood down he finished on a high note, and the firm posted a 14% jump in annual profits last year. Mr Thiam was at the helm of the insurer since 2007, and he announced his plan to leave in March 2015, and during that period of time the stock increased by 147%. Mr Wells, who previously ran Prudential’s US arm took over the running of the company in June of this year, and he has big boots to fill.

As I previously stated, Mr Thiam was hoping to grow the company ‘aggressively’ in Asia, but now the Chinese stock market is encountering turbulence his successor Mr Wells may want to try a different tactic. Prudential already generates one third of its operating profits from Asia, and should China continue to slow down it will have negative ramifications for the region.

When the insurer reveals its first-half results, the market is expecting a revenue of £1.38 billion, and that compares with the second-half figures of last year which came in at £1.31 billion. Prudential reports its full-year results in March 2016, and the market is anticipating revenue of £56.9 billion, and adjusted net income of £2.82 billion. These forecasts represent a 5.3% drop in revenue and a 14.6% rise in adjusted net income.

Investment banks are bullish on Prudential, and out of the 25 ratings, 17 are buys, six are holds, and two are sells. The average target price is £18.45, and that is 22% above the current price. Equity analysts are also very bullish on Legal and General, and out of the 20 recommendations, 11 are buys, six are holds, and three are sells. The average target price is 281p, which is 6.8% above the current price.

Prudential’s share price has been in an upward trend since 2009 and despite the pullback since March the medium-to-long-term outlook is still positive, and the all-time high of £17.61 is the target. The long-term upward trend indicates we are moving higher, but a further fall to the support at £14 could be possible before the next leg up. If £14 is punctured the next level of support will be found at £12. 

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