Prudential plc (LON:PRU) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals.
After the upgrade, the consensus from Prudential's nine analysts is for revenues of US$54b in 2021, which would reflect a noticeable 3.4% decline in sales compared to the last year of performance. Per-share earnings are expected to soar 130% to US$1.88. Previously, the analysts had been modelling revenues of US$48b and earnings per share (EPS) of US$1.59 in 2021. So we can see there's been a pretty clear increase in analyst sentiment in recent times, with both revenues and earnings per share receiving a decent lift in the latest estimates.
View our latest analysis for Prudential
It will come as no surprise to learn that the analysts have increased their price target for Prudential 5.4% to UK£15.38 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Prudential, with the most bullish analyst valuing it at UK£18.00 and the most bearish at UK£10.00 per share. This shows there is still some diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Prudential's past performance and to peers in the same industry. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2021 compared to the historical decline of 8.3% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 5.5% annually. So while a broad number of companies are forecast to grow, unfortunately Prudential is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow slower than the wider market. Given that the consensus looks almost universally bullish, with a substantial increase to forecasts and a higher price target, Prudential could be worth investigating further.
Using these estimates as a starting point, we've run a discounted cash flow calculation (DCF) on Prudential that suggests the company could be somewhat undervalued. For more information, you can click through to our platform to learn more about our valuation approach.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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