2018 guidance broadly in line with expectations
PRU's outlook call provided few surprises and 2018 guidance of $11.30-11.70 was broadly in line with consensus of $11.39. Points of note included: i) an increase in the forecast free cash flow as a percentage of AOI to 65% (from 60% in 2017), ii) a very conservative estimate for the S&P500 of 2,675 (end 2018), iii) another conservative estimate for the US10Y yield of 2.4% (end 2018), and iv) a small step up in the tax rate to 26% (from 25%). We currently forecast EPS of $11.54 in 2018 and note that increasing our tax rate would lower our forecast to $11.38. Given the ongoing tax discussions, we have not altered our EPS forecasts at this juncture but have increased our FY18 dividend by 7% to reflect the higher capital return plans. We retain our Neutral rating.Prudential is a parent holding company. Co., together with its subsidiaries, is an international financial services group with its principal operations in Asia, the U.S. and the U.K. In Asia, Co. has operations in Hong Kong, Indonesia, Malaysia, Singapore and other markets. In the U.S., Co.'s principal subsidiary is Jackson National Life Insurance Company. In the U.K., Co. operates through its subsidiaries, primarily The Prudential Assurance Company Limited and M&G Investment Management Limited. Co. provides a range of retail financial products and services and asset management services throughout these territories.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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