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Should You Retain Principal Financial (PFG) in Your Portfolio?

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Principal Financial Group, Inc. (PFG - Free Report) continues to be an investor favorite on the back of its higher net investment income across its segments, solid sales, strong retention and employment growth.

Growth Projections

The Zacks Consensus Estimate for Principal Financial’s 2023 earnings per share is pegged at $7.66, indicating a year-over-year increase of 15.2%. The expected long-term earnings growth rate is pegged at 8.1%.

Zacks Rank & Price Performance

Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has rallied 9.7% against the industry’s decline of 26.8% in the past year.

Zacks Investment Research
Image Source: Zacks Investment Research

Earnings Surprise History

Principal Financial has a solid record of beating earnings estimates in each of the last six quarters.

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 higher net investment income across its segments.

In 2022, Principal Financial expects to grow its operating earnings per share at a rate of 10-13%.

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.

With positive net cash flow over the trailing 12 months, strong investment performance and the migration of institutional retirement and trust retirement assets, Principal Financial’s assets under management should continue to gain.

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.

Principal Financial boasts a strong capital position. PFG’s estimated risk-based capital ratio was 400% at the end of the first quarter, in line with the target. PFG continues to maintain a 20% to 25% leverage ratio and expects the ratio to improve in the long run.

PFG hiked its dividend by 5% in the first quarter of 2022 and currently yields 3.8%, better than the industry average of 3.5%. This is in line with the targeted 40% dividend payout ratio and reflects strong business performance.

PFG remains on track to return the targeted $2.5 billion to $3 billion of capital to shareholders in 2022, including $2 billion to $2.3 billion in share repurchases.

Stocks to Consider

Some better-ranked stocks from the finance sector are Apollo Global Management Inc. (APO - Free Report) , Portman Ridge Finance Corporation (PTMN - Free Report) and PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) . While Apollo Global Management and Portman Ridge Finance currently sport a Zacks Rank #1 (Strong Buy), PennantPark Floating Rate carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apollo Global Management’s earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 37.7%. In the past year, APO’s stock has lost 22.6%.

The Zacks Consensus Estimate for APO’s 2022 and 2023 earnings per share indicates year-over-year increases of 29.4% and 17.6%, respectively.

Portman Ridge Finance’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average surprise being 11%. In the past year, PTMN stock has gained 1.5%.

The Zacks Consensus Estimate for PTMN’s 2022 and 2023 earnings per share indicates year-over-year increases of 9.6% and 11.2%, respectively.

PennantPark’s earnings surpassed estimates in two of the last four quarters while missed in one and matched in the other one, the average surprise being 4.47%.

The Zacks Consensus Estimate for PFLT’s 2022 earnings per share indicates a year-over-year increase of 11.3%. In the past year, PennantPark has lost 10.9%.