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Mike van Dulken, Head of Research at Accendo Markets, commented:
Prudential (PRU) reports H1 2012 results tomorrow. The shares have recently rallied 20% from May lows (60% from October lows) to 9½ year highs around 800p. Outperformance of 10% versus the UK 100 (40% from October lows) is not insignificant and implies investor bullishness on the financial services group’s future. Solid market presence in Asia, growing fund management activities (M&G) and limited exposure to Europe’s sovereign debt crisis woes (unlike peer Aviva with its Italian Sovereign bond exposure) keep it attractive. US activities (Jackson) may, however, remain a focus/concern given their group significance and variable annuity activities having shown weakness in Q1. The stock is a consensus Buy, however, after the recent strong gains, progress from here could be limited. Disappointing results could be a catalyst for broker downgrades followed by a treading water or retracement. Peers Legal & General (H1 operating profits +5%, net profits +14%, interim dividend + 18%) and Aviva (H1 operating profits -9%, dividend flat) and Old Mutual (Operating profit +12%, net profit +2%, interim dividend +17%) have already reported. Consensus is looking for H1 Earnings per share (EPS) of 33.3p, up from 32.2p a year ago. Given the limited expectations for profit growth, interim dividend growth is also likely to be flattish (circa 8p), unable to match that of certain peers.
After rallying from lows of 500p in October and 660p in May, CFD & Spread Betting traders have seen the shares regain March highs around 800p. Good results could see the shares make a decisive break of March highs (currently testing) and provide a platform from which to build towards August 2001 highs around 900p. If results are not well received, a fall to 750p (base of current May-Aug rising channel) could be expected.
Shares currently trading at 804.5p, -0.5p/0.0%
Accendo Markets does not have a rating or target price on Aviva, Legal and General or Prudential.
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research