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Should You Retain Principal Financial (PFG) in Your Portfolio?
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Principal Financial Group, Inc. (PFG - Free Report) has been favored by investors on the back of its strong retention and employment growth, higher single premium annuity sales, strategic buyouts and strong capital position.
Optimistic Growth Projections
The Zacks Consensus Estimate for Principal Financial’s 2023 earnings is pegged at $6.67, indicating a 0.15% increase from the year-ago reported figure on 6.1% higher revenues of $14.30 billion. The consensus estimate for 2024 earnings is pegged at $7.47, indicating a 12% increase from the year-ago reported figure on 2.8% higher revenues of $14.70 billion.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 has moved 0.6% and 0.9% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.
Zacks Rank & Price Performance
Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has gained 7.3% compared with the industry’s rise of 10.4% in the past year.
Image Source: Zacks Investment Research
Earnings Surprise History
Principal Financial has a decent earnings surprise history. It beat estimates in three of the last four quarters while missed in one, the average being 10.8%.
Business Tailwinds
Principal Financial’s revenue growth is expected to improve in the long run, riding on higher premiums and other considerations, fees and other revenues and higher net investment income across its segments.
The Principal International segment is likely to benefit from higher single premium annuity sales in Chile. The segment’s operating earnings should gain from foreign currency tailwinds.
The Specialty Benefits Insurance business should continue to gain from record sales, strong retention and employment growth. Growth in the business, favorable claims and disciplined expense management should benefit its pre-tax operating earnings.
Strong institutional flows across equities, real estate and specialty fixed income highlighting the value of diversified distribution through its institutional, retail and retirement channels are likely to drive positive net cash flow.
Principal Financial’s extensive distribution footprint, strategic buyouts and operational discipline should enhance the assets under management growth.
PFG boasts a strong capital position, with sufficient cash generation capabilities and liquidity. By the end of the first quarter, its excess and available capital were $1.8 billion, including more than $1.5 billion at the holding company. The statutory RBC ratio for Principal Life Insurance Company is estimated to be 402%, which is above the midpoint of the targeted RBC ratio of 400%. The company expects free capital flow generation to increase throughout 2023.
Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive. It also boasts a solid dividend yield of 3.5%. It deployed approximately $900 million in the quarter. PFG returned $306 million to shareholders in the first quarter, including $150 million of share repurchases and $156 million of common stock dividends. The investment manager affirmed its return on equity target of 15% in 2023.
Stocks to Consider
Some better-ranked stocks from the finance sector are PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) , Portman Ridge Finance Corporation (PTMN - Free Report) and Federated Hermes, Inc. (FHI - Free Report) . While PennantPark sports a Zacks Rank #1 (Strong Buy), Portman Ridge and Federated Hermes carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
PennantPark’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and missed in one, the average beat being 2.39%. In the past year, PFLT has lost 9%.
The Zacks Consensus Estimate for PFLT’s 2023 and 2024 earnings has moved 7.2% and 4.9% north, respectively, in the past 60 days.
Portman Ridge’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, the average beat being 5.70%. In the past year, PTMN has lost 16.3%.
The Zacks Consensus Estimate for PTMN’s 2023 and 2024 earnings has moved 3.2% and 0.3% north, respectively, in the past 60 days.
Federated Hermes’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 11.04%. In the past year, FHI has gained 12.3%.
The Zacks Consensus Estimate for FHI’s 2023 and 2024 earnings indicates 8.6% and 11.9% year-over-year growth, respectively.
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Should You Retain Principal Financial (PFG) in Your Portfolio?
Principal Financial Group, Inc. (PFG - Free Report) has been favored by investors on the back of its strong retention and employment growth, higher single premium annuity sales, strategic buyouts and strong capital position.
Optimistic Growth Projections
The Zacks Consensus Estimate for Principal Financial’s 2023 earnings is pegged at $6.67, indicating a 0.15% increase from the year-ago reported figure on 6.1% higher revenues of $14.30 billion. The consensus estimate for 2024 earnings is pegged at $7.47, indicating a 12% increase from the year-ago reported figure on 2.8% higher revenues of $14.70 billion.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 has moved 0.6% and 0.9% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.
Zacks Rank & Price Performance
Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has gained 7.3% compared with the industry’s rise of 10.4% in the past year.
Image Source: Zacks Investment Research
Earnings Surprise History
Principal Financial has a decent earnings surprise history. It beat estimates in three of the last four quarters while missed in one, the average being 10.8%.
Business Tailwinds
Principal Financial’s revenue growth is expected to improve in the long run, riding on higher premiums and other considerations, fees and other revenues and higher net investment income across its segments.
The Principal International segment is likely to benefit from higher single premium annuity sales in Chile. The segment’s operating earnings should gain from foreign currency tailwinds.
The Specialty Benefits Insurance business should continue to gain from record sales, strong retention and employment growth. Growth in the business, favorable claims and disciplined expense management should benefit its pre-tax operating earnings.
Strong institutional flows across equities, real estate and specialty fixed income highlighting the value of diversified distribution through its institutional, retail and retirement channels are likely to drive positive net cash flow.
Principal Financial’s extensive distribution footprint, strategic buyouts and operational discipline should enhance the assets under management growth.
PFG boasts a strong capital position, with sufficient cash generation capabilities and liquidity. By the end of the first quarter, its excess and available capital were $1.8 billion, including more than $1.5 billion at the holding company. The statutory RBC ratio for Principal Life Insurance Company is estimated to be 402%, which is above the midpoint of the targeted RBC ratio of 400%. The company expects free capital flow generation to increase throughout 2023.
Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive. It also boasts a solid dividend yield of 3.5%. It deployed approximately $900 million in the quarter. PFG returned $306 million to shareholders in the first quarter, including $150 million of share repurchases and $156 million of common stock dividends. The investment manager affirmed its return on equity target of 15% in 2023.
Stocks to Consider
Some better-ranked stocks from the finance sector are PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) , Portman Ridge Finance Corporation (PTMN - Free Report) and Federated Hermes, Inc. (FHI - Free Report) . While PennantPark sports a Zacks Rank #1 (Strong Buy), Portman Ridge and Federated Hermes carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
PennantPark’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and missed in one, the average beat being 2.39%. In the past year, PFLT has lost 9%.
The Zacks Consensus Estimate for PFLT’s 2023 and 2024 earnings has moved 7.2% and 4.9% north, respectively, in the past 60 days.
Portman Ridge’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, the average beat being 5.70%. In the past year, PTMN has lost 16.3%.
The Zacks Consensus Estimate for PTMN’s 2023 and 2024 earnings has moved 3.2% and 0.3% north, respectively, in the past 60 days.
Federated Hermes’ earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 11.04%. In the past year, FHI has gained 12.3%.
The Zacks Consensus Estimate for FHI’s 2023 and 2024 earnings indicates 8.6% and 11.9% year-over-year growth, respectively.