Why it is Worth Betting on Principal Financial (PFG) Stock
Principal Financial Group, Inc. PFG is poised for growth on the back of its positive net cash flow, favorable claims and disciplined expense management, strategic buyouts and effective capital deployment.
Optimistic Growth Projections
The Zacks Consensus Estimate for Principal Financial’s 2024 earnings is pegged at $7.41 per share, indicating a 15.3% increase from the year-ago reported figure on 4.8% higher revenues of $14.66 billion.
Northbound Estimate Revision
The Zacks Consensus Estimate for PFG’s 2024 earnings has moved 0.4% north in the past seven days. This should instill investors' confidence in the stock.
Zacks Rank & Price Performance
Principal Financial currently carries a Zacks Rank #2 (Buy). The stock has gained 5.4% compared with the industry’s rise of 16.5% over the past six months.
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Earnings Surprise History
PFG has a decent earnings surprise history. It beat estimates in two of the last four quarters while missed in the other two, the average being 1.09%.
Business Tailwinds
Principal Financial’s revenue growth is expected to improve in the long run, riding on higher premiums and other considerations, fees and other revenues and improved net investment income across its segments.
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.
The Specialty Benefits Insurance business should continue to gain from record sales, strong retention and employment growth. Growth in the business, favorable claims and disciplined expense management should benefit its pre-tax operating earnings.
Strong institutional flows across equities, real estate and specialty fixed income highlighting the value of diversified distribution through its institutional, retail and retirement channels are likely to drive positive net cash flow.
Principal Financial’s extensive distribution footprint, strategic buyouts and operational discipline should enhance the assets under management growth.
PFG boasts a strong capital position, with sufficient cash generation capabilities and liquidity. By the end of the second quarter, its excess and available capital was $1.4 billion, including more than $940 million at the holding company, $360 million in subsidiaries and $50 million in excess of targeted 400% risk-based capital ratio (RBC). The estimated statutory RBC ratio for Principal Life Insurance Company of 407% is above the midpoint of the targeted RBC ratio range of 400%.
Principal Financial’s capital deployment through share buybacks and dividend payments looks impressive. The board approved a 3.1% hike in its dividend. This is in line with the targeted 40% dividend payout ratio and reflects strong business performance. It also boasts a solid dividend yield of 3.3%, which compares favorably with the industry average of 2.6%.
The company paid back more than $350 million to shareholders in the third quarter through $200 million of share repurchases and $156 million of common stock dividends.
Other Stocks to Consider
Some other top-ranked stocks from the Financial - Investment Management sector are Prospect Capital Corporation PSEC, Janus Henderson Group plc JHG and Noah Holdings Ltd. NOAH. While Prospect Capital sports a Zacks Rank #1 (Strong Buy), Janus Henderson and Noah Holdings carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Prospect Capital’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 17.33%. Over the past six months, PSEC has lost 3.3%.
The Zacks Consensus Estimate for PSEC’s 2024 revenues indicates 3.9% year-over-year growth.
Janus Henderson’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 21.08%. Over the past six months, JHG has gained 6.7%.
The Zacks Consensus Estimate for JHG’s 2024 earnings indicates 0.5% year-over-year growth.
The Zacks Consensus Estimate for Noah Holdings’s 2024 earnings indicates 17.6% year-over-year growth. Over the past six months, NOAH has lost 9.6%.
The Zacks Consensus Estimate for NOAH’s 2024 earnings has moved 2% north in the past 60 days.
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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
Noah Holdings Ltd. (NOAH) : Free Stock Analysis Report
Prospect Capital Corporation (PSEC) : Free Stock Analysis Report
Janus Henderson Group plc (JHG) : Free Stock Analysis Report
