Prudential Financial (PRU) trades at book value and is expected to see a 10% increase in its stock price while having a dividend yield, and although the stock has seen upside earlier in the year, Randy Binner, Managing Director at FBR Capital Markets & Co. expects it to continue its climb.
“Prudential is our top pick. It has been a good call to be higher beta, higher risk, and we think that it’s going to continue, and so Prudential is our top pick. Even though the stock is up 22% year to date, it’s still only trading at seven times its 2014 earnings, so we think they had a great first quarter,” Binner said.
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Binner the recent drop in insurance stocks made PRU inexpensive, and he expects significant upside from the stock this year. He further says this may present a good opportunity given the insurer is a top U.S. company.
“We think they will have $8 in EPS this year and $9 in 2014. It’s a $75 stock, and so for us, that kind of valuation, upside to target probably about 10%, and you get a 2.5% dividend yield for large, well-managed, diversified global brand. That’s a very good opportunity with the market at a nominal all-time high to buy a top U.S. company for eight times earnings, and so that’s how cheap that the market has left these life insurance stocks,” Binner said.
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