While 2014 has been a bit of a let-down for the FTSE 100, it’s also been a disappointment for Prudential (LSE: PRU) (NYSE: PUK.US). Indeed, the index is down over 2% so far this year and Prudential has fallen by over 3% year-to-date. However, Prudential has the potential to post a strong remainder of 2014. Here’s why.
A Return To Growth
Although Prudential posted a reduction in earnings per share (EPS) in 2013, it is set to get back on-track in 2014. EPS is forecast to increase by 82% in 2014, although this growth rate is flattered because of the lower than expected EPS figure that was posted in 2013. However, despite 2013’s disappointment, Prudential looks set to deliver annual growth in EPS of 6.3% between 2012 and 2014, which is above-average and shows that even a blip in earnings can be recovered from relatively quickly.
Furthermore, Prudential is expected to report EPS in 2015 that is 11% higher than 2014’s forecast figure. This shows that Prudential continues to be a relatively attractive growth stock.
A Growing Yield
Despite Prudential’s yield currently being just 2.6% (which is well below the yield of the FTSE 100, which has a yield of 3.3%), Prudential is forecast to increase dividends per share at a brisk pace. For example, dividends per share are expected to increase by 5.7% in 2014 and by 9.6% in 2015. This is not only above the FTSE 100 average, but is more than three times the current rate of inflation, which is encouraging news for investors.
Looking Ahead
As mentioned, shares in Prudential have been rather weak thus far in 2014. This has meant that the price to earnings (P/E) ratio of the stock has fallen to 13.5, which is roughly in-line with that of the FTSE 100, whose P/E is 13.3. However, Prudential appears to offer better value than the index as a result of its above-average earnings growth prospects and the strong pace of growth that is expected to occur in its dividend per share payments.
As such, although 2014 has not been great for Prudential thus far, it could turn out to be a strong year for the stock.