On Thursday, Keefe, Bruyette & Woods adjusted their price target for Prudential Financial (NYSE:PRU) shares, bringing it down to $129.00 from the previous $135.00.
The firm maintained its Market Perform rating on the stock. The revision follows Prudential Financial’s disclosure of an "immaterial error" in its operating earnings that resulted in a downward adjustment of its year-to-date operating EPS for the third quarter of 2024 by $0.31, or 3%.
The error pertains to the costs of options related to Retirement Income Liability Annuity (RILA) and Fixed Index Annuity (FIA) products, which were originally split between operating income and net income. The corrected accounting now consolidates all option costs under operating expenses.
The impact of this correction has grown as Prudential (LON:PRU) expands its RILA and FIA offerings. Consequently, Keefe, Bruyette & Woods revised their EPS estimates for Prudential for the years 2025 and 2026.
The analysts said "The impact has been building as PRU grows its RILA/FIA business, and we reduced 2025E/2026E EPS by -4% to $14.10/$15.10 from $14.75/$15.75 as a result. We also lowered our price target to $129 based on 8.5x 2026E EPS."
Additionally, Prudential pre-announced select metrics for the fourth quarter of 2024, prompting Keefe, Bruyette & Woods to increase their EPS estimate for that period to $3.20 from $3.17.
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