Steve Wevodau

Ahead of the Bell: Prudential Financial Inc.

POSTED BY STEVEN WEVODAU

Analyst cuts Prudential’s estimates, citing investment losses and potential need for capital

CHARLOTTE, N.C. (AP) — Continued declines in equity markets and the potential for a capital raise — including offloading its joint venture with Wachovia Corp. — led an analyst on Monday to cut his earnings estimates and price target for insurer Prudential Financial Inc.

Citi Investment Research analyst Colin Devine cut his fourth quarter and 2008 earnings estimates because of “sub-par performance” from the company’s domestic variable annuity and 401(k) group pension businesses and continued declines in equity markets on fee based revenues.

“To be certain, Prudential has issues; a lot of them,” Devine wrote in a research note to clients.

Devine lowered his fourth-quarter earnings estimate to $1.54 per share from $2.01 per share, and his 2008 estimate to $5.95 per share from $7.40 per share.

Analysts polled by Thomson Reuters, on average, forecast quarterly earnings of $1.40 per share and $5.97 per share for the year.

Devine slashed his price target to $30 from $80, but raised his rating for the Newark, N.J. company to “Buy” from “Hold.” He said he believes the market has significantly over-discounted the company’s shares.

Prudential’s shares closed Friday at $21.70. In premarket trading Monday, the shares were down 35 cents to $21.35.

Devine said Prudential may need to raise capital by year-end, as many insurance firms have been hit hard in recent quarters by investment losses as the stock markets have sunk. It could consider monetizing the company’s nearly 25 percent stake its retail-brokerage joint venture with Charlotte, N.C.-based Wachovia, he said.

“We expect Prudential will attempt to either negotiate an early exit from the joint venture or potentially sell its stake to a third-party,” Devine wrote.

Tags: Prudential, Steve Wevodau, Steven Wevodau, Steven Wevodau Insurance