2023-06-18 17:35:00 ET
Jefferies analyst Suneet Kamath has re-opened a trading pair of Hold-rated MetLife ( NYSE: MET ) over Underperform-rated Prudential Financial ( NYSE: PRU ).
Gaps in both valuation and year-to-date relative performance of the two stocks appear unwarranted based on underlying fundamentals, Kamath said in a note to clients. Year-to-date, MetLife ( MET ) shares have dropped 24% , while Prudential's ( PRU ) have slipped 13%.
While MetLife ( MET ) has more exposure to CMLs, particularly in office, "we view its stronger excess capital position as a meaningful offset," the analyst said. Jefferies also expects MetLife to benefit more when sentiment improves to the extent that economic concerns begin to decline.
In business mix, Kamath expects high P/E segments will make up a larger portion of MET's earnings (27%) relative to low P/E operations (9%) by 2026. And while PRU's business mix will shift toward higher P/E operations, he estimates they'll only make up 13% of PRU 2026 earnings, with low P/E operations accounting for 20%.
He estimated MetLife ( MET ) will be in a much stronger position regarding excess capital than Prudential ( PRU ).
On credit quality, the two stocks screen similarly. "At a high level, there does not appear to be material differences between the two," Kamath said.
Compare MET's metrics with PRU here.
Note that the SA Quant system rates MetLife ( MET ) and Prudential ( PRU ) both as Holds.
More on MetLife and Prudential:
- Prudential Financial: Solid as a Rock, Worth Buying
- Prudential Financial Looks Undervalued Now With a Stable Yield of 6%
- MetLife Disappoints on Earnings but Is Attractive on Dividends and Capital Position
- MetLife unveils new $3B stock buyback as Q1 earnings disappoint
- Prudential stock slips after Q1 earnings trail consensus
For further details see:
Jefferies takes MetLife over Prudential in insurance pair trade