In a note issued Monday, Morgan Stanley analyst Nigel Dally upgraded Principal Financial Group (NYSE: PFG) from Underweight to Equal-weight and removed the price target.
The upgrade was made to reflect three factors.
- Improved outlook for FSA: Dally noted that the competitive conditions for the pension market have somewhat stabilized. He explained that this has lessened his concerns that margins could "meaningfully erode" if market conditions were to deteriorate.
- Rebound in Latin America: Dally noted that currencies, which were previously a key concern, have appreciated from recent lows. Additionally, he pointed to the recent rebound of equity markets in emerging markets as alleviating investor concerns.
- Above Consensus: Taking these items under consideration, Dally noted the firm has raised its estimates to a position "meaningfully" above the consensus. Based on these new estimates, Dally explained that the sum of the parts valuation now has a 12-month fair value of $55 and 12 percent potential upside.
Shares of Principal Financial are trading up ~1.3 percent.
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