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Reasons Why Investors Should Retain Principal Financial (PFG)

Zacks Equity Research
·4-min read

Principal Financial Group, Inc. PFG is poised for growth on the back of its higher premiums and other considerations, strong investment performance, and improved guidance.

Growth Projections

The Zacks Consensus Estimate for Principal Financial’s 2023 earnings per share is pegged at $7.64, indicating a year-over-year increase of 15.6%. The expected long-term earnings growth rate is pegged at 8.1%.

Zacks Rank & Price Performance

Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has rallied 8.2% against the industry’s decline of 27.4% in the past year.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Earnings Surprise History

Principal Financial has a solid record of beating earnings estimates in six of the last seven quarters and missed in one.

Business Tailwinds

The top line of Principal Financial 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 Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $13 billion, indicating a year-over-year increase of 0.6%.

In 2022, Principal Financial expects to grow its operating earnings per share at a rate of 10-13%.

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.

With positive net cash flow over the trailing 12 months, strong investment performance and the migration of institutional retirement and trust retirement assets, Principal Financial’s assets under management should continue to gain.

In 2022, combined net revenues at the Principal International segment are projected to be $963 million, suggesting a decline of 2% to a rise of 2%.

Specialty Benefits’ premium and fees should continue to gain from record sales, strong retention, and employment growth. Trailing 12-month employment growth was a record 4.7% for the total block.

Principal Financial boasts a strong capital position, with sufficient cash generation capabilities and liquidity. The investment manager exited the first quarter with $1.7 billion of excess and available capital, including $1.4 billion at the holding company, higher than $800 million to cover 12 months of obligations, and around $325 million in subsidiaries.

In the first quarter of 2022, Principal Financial returned nearly $900 million to shareholders, including $167 million of dividends and $724.4 million of share repurchases, higher than the $600-$800 million repurchase target.

In January 2022, the board approved a $1.6 billion increase to the $1.1 billion available under the company’s existing share repurchase authorization as of Dec 31, 2021, resulting in an aggregate of $2.7 billion.

Stocks to Consider

Some better-ranked stocks from the finance sector are Prospect Capital Corporation PSEC, Great Elm Capital Group, Inc. GECC and PennantPark Floating Rate Capital Ltd. PFLT. While Prospect Capital currently sports a Zacks Rank #1 (Strong Buy), Great Elm and PennantPark Floating Rate carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Prospect Capital’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 11%. In the past year, Prospect Capital’s stock has lost 15.5%.

The Zacks Consensus Estimate for PSEC’s 2022 and 2023 earnings per share indicates year-over-year increases of 9.6% and 11.2%, respectively.

Great Elm Capital’s earnings surpassed estimates in two of the last four quarters and missed in the other two, the average surprise being 39.4%. In the past year, GECC stock has lost 45.3%.

The Zacks Consensus Estimate for GECC’s 2022 earnings has moved 3.5% north in the past 30 days.

PennantPark’s earnings surpassed estimates in two of the last four quarters and missed in the other two, the average surprise being 4.47%.

The Zacks Consensus Estimate for PFLT’s 2022 earnings per share indicates a year-over-year increase of 11.3%. In the past year, PennantPark has lost 7.1%.


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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
 
PennantPark Floating Rate Capital Ltd. (PFLT) : Free Stock Analysis Report
 
Prospect Capital Corporation (PSEC) : Free Stock Analysis Report
 
Great Elm Capital Group, Inc. (GECC) : Free Stock Analysis Report
 
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