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Principal Financial rises as 2Q results top Street

NEW YORK (AP) -- Shares of Principal Financial Group Inc. rose to their highest level in more than four years on Friday after the financial services company's second-quarter results topped Wall Street's expectations.

THE SPARK: Late Thursday, Principal Financial reported second-quarter operating earnings of 91 cents per share on operating revenue of $2.31 billion. Analysts surveyed by FactSet predicted earnings of 82 cents per share on revenue of $2.34 billion.

The company also raised its quarterly dividend by 13 percent to 26 cents per share. The dividend will be paid on Sept. 27 to shareholders of record on Sept. 5.

THE ANALYSIS: John Nadel of Sterne, Agee & Leach said in a client note that Principal Financial probably benefited from lower expenses, solid benefits underwriting results and better spreads. The analyst boosted his price target on the company's stock to $45 from $39 and maintained a "Neutral" rating.

Citi Investment Research's Erik Bass also kept a "Neutral" rating. The analyst noted Principal Financial's improving margins, since there have been concerns about fee compression and the company's ability to translate net cash flow —which is a sign of a company's financial health — into increased earnings.

SHARE ACTION: Up $1.97, or 4.9 percent, to $42.43 in afternoon trading. Earlier in the session, the stock touched $42.89, the highest point since October 2008.