Atlantic Equities analyst John Heagerty downgraded his call on Prudential Financial Inc. to "neutral" from "overweight" after what he described as "poor" second-quarter results by the insurer, "weak" guidance and stiffening headwinds from falling interest rates.
Prudential's second-quarter EPS missed Heagerty's predictions by 5% and lowered third-quarter guidance. That is an "abrupt reversal" from the positivity the company expressed during its June investor day, the analyst said.
"With interest rates putting downward pressure on investment income, it is hard to see a positive catalyst for [the company] over the next 12 months," he said, adding elsewhere in his note to clients that Prudential's troubles seem to be "more than temporary."
The realization of future cost savings is still "very uncertain" in a competitive market, Heagerty said, though he acknowledged efforts on the part of company management and an increased focus on technology.
Heagerty lowered his price target on the stock to $95 from $120. His EPS forecasts fell to $12.18 from $12.77 for 2019 and to $12.85 from $13.94 for 2020.
Also, the analyst retained his "overweight" rating on MetLife Inc. with a price target of $55, but lowered his EPS forecasts to $5.68 from $5.73 for 2019 and to $6.19 from $6.28 for 2020.