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Why Is Principal Financial (PFG) Down 17% Since Last Earnings Report?

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It has been about a month since the last earnings report for Principal Financial (PFG - Free Report) . Shares have lost about 17% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Principal Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Principal Financial Q4 Earnings & Revenues Top Estimates

Principal Financial Group, Inc.’s fourth-quarter 2021 operating net income of $1.85 per share beat the Zacks Consensus Estimate by 13.5% and grew 25% year over year.

Principal Financial witnessed higher revenues across most of its business lines and higher assets under management (AUM), which were offset by higher expenses.

Full-Year Highlights       

For 2021, Principal Financial reported an operating net income of $6.77 per share, which beat the Zacks Consensus Estimate by 3.3%. Moreover, it increased 37% year over year. Total operating revenues of $14.26 billion beat the consensus mark by 1.2%. However, it decreased 1.2% year over year.

Behind the Headlines   

Operating revenues increased 11.7% year over year to nearly $4.1 billion. The upside was due to higher fees and other revenues, net investment income and premiums and other considerations. The top line beat the Zacks Consensus Estimate by 9.9%.

Total expenses increased 9.7% year over year to $3.5 billion due to higher operating expenses and benefits, claims and settlement expenses.
Principal Financial’s AUM as of Dec 31, 2021 was $713.9 billion, up 7.4% year over year.

Segment Update

Retirement and Income Solution: Revenues increased 6.8% year over year to about $1.9 billion. Pre-tax operating earnings increased 23.6% to $329.8 million on account of improved performance at Retirement and Income Solution- Fee and Spread business.

Principal Global Investors: Revenues of $493.9 million were up 19.7% from the prior-year quarter. Operating earnings increased 27% year over year to $192.8 million, primarily due to higher operating revenues less pass-through expenses, partially offset by higher operating expenses.

Principal International: Revenues increased 39% year over year to $409.5 million in the quarter. Operating earnings increased 77% to $105.2 million due to higher combined net revenues.
U.S. Insurance Solution: Revenues grew 6.3% year over year to $1.2 billion.
Operating earnings of $97.4 million increased 8.8% year over year due to improved performance at the Specialty Benefits Insurance business.

Corporate: Operating loss of $94.4 million was wider than the $81.6 million loss incurred a year ago due to higher operating expenses.

Financial Update

As of Dec 31, 2021, cash and cash equivalents were $2.3 billion, up 18.2% year over year. At the fourth-quarter end, debt was $4.3 billion, up 0.02%. As of Dec 31, 2021, book value per share (excluding AOCI other than foreign currency translation adjustment) was $49.27, up 4.7% year over year.

Capital Deployment

Principal Financial paid out $168.5 million in dividends and bought back shares worth $352.1 million in the fourth quarter. The board of directors approved a fourth-quarter dividend of 64 cents per share, up 14% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Principal Financial has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. 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 these revisions 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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