Goldman Adds Prudential to Recommended List

Analyst Joan Zief says the financial services firm is making steps towards a turnaround, and preparing to raise its long-term return on equity

Goldman initiates coverage on Prudential Financial (PRU ) and adds to recommended list.

Analyst Joan Zief says Prudential Financial is committed to raising its below-trend return on equity of 6.7% estimated for 2002, and has a targeted 12% in three to four years. She notes that getting there will require additional expense saves, a turnaround of underperforming businesses, and the effective redeployment of excess capital into higher return endeavors. Zief says if she sees greater visibility of 8% on her estimated 2003 return on euqity, then in 12 months Prudential could be trading near 1.05 to 1.10 times her estimated 2003 book value of $35.69. She notes this is equivalent to $38, a 22% upside. Finally, Zief sees $1.27 2001 EPS, and $2.23 for 2002.

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