It has been about a month since the last earnings report for Principal Financial (PFG). Shares have added about 16.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Principal Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Principal Financial Q1 Earnings Miss, Revenues Beat
Principal Financial's first-quarter 2020 operating net income of $1.15 per share missed the Zacks Consensus Estimate by 3.4%. Also, the bottom line declined 19.6% year over year.
Principal Financial witnessed higher revenues across most of its business lines, offset by higher expenses and lower assets under management (AUM).
Behind the Headlines
Operating revenues rose 21.1% year over year to $4.4 billion. Higher premiums and other considerations plus net investment income drove this upside. Moreover, the top line beat the Zacks Consensus Estimate by 17.7%.
Total expenses increased 31.2% year over year to $4.2 billion due to higher benefits, claims and settlement expenses as well as operating expenses. Principal Financial’s AUM as of Mar 31, 2020 amounted to $631.1 billion, down 6.6% year over year.
Retirement and Income Solution: Revenues surged nearly 37.7% year over year to about $2.6 billion on the back of higher premiums and other considerations, fees and other revenues and net investment income.
Pre-tax operating earnings decreased 14.8% year over year to $205.1 million on account of weak performance at Retirement and Income Solution — Fee business.
Principal Global Investors: Revenues of $390.8 million were up 15.3% from the prior-year quarter driven by higher fees and other revenues.
Operating earnings increased 10.9% year over year to $111.7 million on the back of higher operating revenues less pass-through expenses partially offset by higher variable expenses.
Principal International: Revenues fell 21% year over year to $300.5 million in the quarter due to lower premiums and other considerations, fees and other revenues and net investment income.
Operating earnings decreased 72.3% year over year to $30.8 million due to unfavorable encaje performance in the current quarter relative to favorable encaje performance in the year-ago quarter as well as foreign currency translation headwinds.
U.S. Insurance Solution: Revenues grew 5.2% year over year to $1.1 billion driven by higher premiums and other considerations, fees and other revenues.
Operating earnings of $129.5 million increased 17% year over year, mainly due to strong performance at Specialty Benefits Insurance business.
Corporate: Operating loss of $91.1 million was wider than $84.4 million loss incurred a year ago. This downside was due to higher operating expenses.
As of Mar 31, 2020, cash and cash equivalents were $3.5 billion, up 54.1% year over year.
At first-quarter end, debt was $3.7 billion, up 12.4% year over year.
As of Mar 31, 2020, book value per share (excluding AOCI other than foreign currency translation adjustment) was $43.45, up 1.7% year over year.
Dividend and Share Repurchase Update
The company paid out $153.6 million in dividends and deployed $217.8 million to buy back 4.1 million shares in the quarter under review.
The board of directors approved second-quarter dividend of 56 cents per share, up 3% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.38% due to these changes.
At this time, Principal Financial has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Principal Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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