On Apr 10, 2013, shares of Principal Financial Group Inc. (PFG) hit a 52-week of $34.88.
The investment manager has remained focused to grow inorganically. On Mar 4, Principal Global Investors, LLC, the investment arm of Principal Financial agreed to purchase 55% shares of Liongate Capital Management in an effort to expand its alternative investment capabilities. Principal Financial also closed the acquisition of Chile-based AFP Cuprum S.A. in February. The acquisition fortifies Principal’s leading position in providing retirement products in Chile. Principal Financial expects the Cuprum acquisition to be accretive to earnings by 12 cents a share in 2013 and 23 cents per share in 2014 along with 75 basis points of accretion to return on equity in this year and the next.
The company’s asset under management is exhibiting a steady uptrend driven by better results at three asset management and asset accumulation segments.
In addition, in February, Fitch Ratings reiterated the long-term Issuer Default Rating (:IDR) of Principal Financial at 'A'. Concurrently, the rating agency reiterated the Insurer Financial Strength (:IFS) at 'AA-' of the operating subsidiaries. The rating affirmations accounted for Principal Financial’s sturdy capitalization and continued solid operational performance.
With respect to earnings trend, Principal Financial managed to deliver positive earnings surprise only in the last quarter of 2012. Nevertheless, our proven model shows that the investment manager is likely to beat earnings in the first quarter of 2013 because it has a right combination of a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and Zacks Rank. ESP or Expected Surprise Prediction, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate is at +2.70%. Principal Financial presently carries a Zacks Rank #2 (Buy).
Principal Financial is scheduled to release its first-quarter 2013 earnings on Apr 25 after the market closes.
Valuation for Principal Financial looks reasonable. The shares are trading at a discount to the peer group average both on a price-to-book basis (16.7% discount to peer group) and on a forward price-to-earnings basis (17.6% discount to peer group) with return on equity 8.8% lower than the peer group average. The 1-year return from the stock is 18.8%, above S&P’s return of 13.6%.
Investment managers AllianceBernstein Holding L.P. (AB) and Apollo Global Management, LLC (APO) among others carry a Zacks Rank #1 (Strong Buy), while Ameriprise Financial Inc. (AMP) carries a Zacks Rank #2 (Buy).
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