Stock of the day 08/03/2016 – Prudential PLC

Prudential hit a bit of a snag last year, its 6 year surge stalling as 2015 went on; with 2016 looking even worse can the company instil some confidence with its full year figures on Wednesday?

From an all-time high of £17.72 last March Prudential had fallen below £14, a then year-low for the stock, in the nightmarish post-Black Monday landscape that lasted between August and the end of October. By the start of November, however, Pru had managed to climb back to the £15.50s, the price it had been hovering at before the disastrous trading of August entered its stickiest patch.


(Source: IT-Finance.com 08/03/2016)

Whilst its recovery was largely uninterrupted, Prudential did take a bit of a knock with its third quarter update in early November. Despite posting a 13% rise in overall new business profit to £1.76 billion (£976 million of that from Asia, itself a 24% increase), that growth was overshadowed by the near £4 billion in funds removed from Pru’s UK asset management firm M&G during Q3, withdrawals largely inspired by investors’ concerns over fixed income markets. Yet whilst it did dip under £15 in the aftermath of the update Prudential soon was back on the road to recovery, closing out the year at £15.35.

However, in a now well-worn market-wide tale, Prudential suffered severely as 2016 began, plunging to a near 2 and a half year low of £10.85 by the middle of February, the company dragged down by investors’ fears over the impact the continued Chinese economic slowdown will have on its all-important Asian division. Yet following the broader market movements Pru has seen a rather robust recovery since then, however, climbing back to a current trading price of £13.14 (IT-Finance.com, 08/03/2016).

What is interesting about Prudential’s recent rise is that it comes despite the announcement of an FCA investigation into the company (and 5 other insurance firms) about the impact exit charges might be having on its customers. The news had very little effect on the company’s stock price, though that may change as the investigation progresses.

In terms of its full year figures on Wednesday, analysts are expecting Prudential to post a 15% increase in operating profits to £3.6 billion alongside a 6% surge in its dividend to 39p. More importantly investors will be looking for reassurance over its Asian business given continued slowdown in China, whilst one imagines an update on the FCA investigation will be welcome.

Prudential PLC has a consensus rating of ‘Buy’ with an average target price of £17.44.