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What Awaits Principal Financial (PFG) This Earnings Season?

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Principal Financial Group, Inc. (PFG - Free Report) is slated to report fourth-quarter 2020 results on Jan 28, after market close. The company delivered a negative earnings surprise of 42.18% in the last reported quarter.

Factors at Play 

Principal Financial fourth-quarter results are expected to reflect lower single premium annuity sales and foreign currency headwinds. Assets under management are likely to have improved, driven by favorable market performance as well as positive net cash flow.

Given the low interest rate environment, the company estimates a slowdown in pension risk transfer sales as well as lower annuity sales in the fourth quarter.

Unfavorable relative market performance on regulatory investments, lower single premium annuity sales and foreign currency headwinds are likely to have affected revenues of Principal International segment.

In the U.S. Insurance Solutions segment, Specialty Benefits insurance business is likely to have been affected by rising unemployment due to temporary business closures, dental premium credits, personal protective equipment reimbursements and restrictions, which may impact new sales in businesses and reduce in-group growth.

Lower sales of single premium group and individual annuities with life contingencies, less favorable actuarial assumption updates, unfavorable relative market performance on required regulatory investments, and foreign currency headwinds are likely to have hurt revenue growth in the to-be-reported quarter.

Unfavorable relative market performance on required regulatory investments, foreign currency headwinds, lower inflation-based investment returns on average invested assets and cash, lower variable investment income, decreases in short-term interest rates on cash and cash equivalents are likely to have hurt the company’s net investment income in the to-be-reported quarter.

Expenses are likely to have increased due to higher operating expenses. Fourth-quarter compensation and other expenses are typically 7% to 10% higher than other quarters due to seasonality of certain expenses like marketing and IT. Expenses in the fourth quarter are expected to be at or below this range.

Operating expenses are likely to have increased due to acquired business, favorable actuarial assumption updates and model refinements in Specialty Benefits insurance business.

The Zacks Consensus Estimate for earnings stands at $1.42 per share, indicating a decline of 0.71% from the year-ago reported figure.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Principal Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Principal Financial has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at $1.42. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Principal Financial Group, Inc. Price and EPS Surprise

Zacks Rank: Principal Financial carries a Zacks Rank #3.  

Stocks to Consider  

Some stocks from the investment management industry with the right combination of elements to surpass estimates this time around are as follows:

Capital Southwest Corporation (CSWC - Free Report) has an Earnings ESP of +4.24% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Focus Financial Partners Inc. has an Earnings ESP of +0.86% and a Zacks Rank #2.

Janus Henderson Group plc (JHG - Free Report) has an Earnings ESP of +2.80% and a Zacks Rank of 2.

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