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Reasons Why You Should Hold Principal Financial (PFG) Stock

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Principal Financial Group, Inc. (PFG - Free Report) has been gaining momentum from improved sales of whole life and term life insurance policies, strategic acquisitions and solid financial position.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $6.29, indicating year-over-year increase of nearly 28.6%.

Top-line growth continues to be driven by increased premiums and other considerations, fees and other revenues and higher net investment income across the company’s segments. The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $14.8 billion, indicating an increase of 2.2% from the year-ago reported figure.

Higher sales of whole life and term life insurance policies, immediate annuities with life contingencies, higher average invested assets and acquired business are estimated to drive the metric in the near term.

The assets under management (AUM) base through which the company generates management fee revenues is well poised for growth on the back of positive net cash flow, favorable market performance, strategic acquisitions, operational discipline and extensive distribution footprint of the company.

Principal Financial boasts a solid balance sheet with high liquidity and improving leverage. Its debt to capital of 21.7% betters the industry average of 38.8%. The company remained well-capitalized with $3.4 billion in available cash and liquid assets and $2.6 billion of excess and available capital at the third quarter end.

Banking on its sound capital and liquidity position, it has increased its dividend at a six-year (2014-2020) CAGR of 12.3%. Its current dividend yield of 4.2% is higher than the industry average of 2.6%, which makes the stock an attractive pick for yield-seeking investors. It has $850 million remaining under its share repurchase program.

However, shares of this Zacks Rank #3 (Hold) global investment management company have gained 19.9% in the past six months compared with the industry’s increase of 25.1%.

Stocks to Consider

Some better-ranked stocks from the finance sector are Blackstone Group Inc. (BX - Free Report) , Federated Hermes, Inc. (FHI - Free Report) and MarketAxess Holdings Inc. (MKTX - Free Report) . While Blackstone and Federated Hermes currently sport a Zacks Rank #1 (Strong Buy), MarketAxess carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Blackstone Group surpassed estimates in three of the last four quarters, with the average earnings surprise being 2.57%.

Federated Hermes surpassed estimates in three of the last four quarters, with the average earnings surprise being 10.90%.

MarketAxess surpassed estimates in each of the last four quarters, with the average earnings surprise being 2.71%.

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