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Principal Financial (PFG) Q2 Earnings Miss on Higher Expenses
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Principal Financial Group, Inc.’s (PFG - Free Report) second-quarter 2023 operating net income of $1.53 per share missed the Zacks Consensus Estimate by 7.8%. Also, the bottom line decreased 7.3% year over year.
Operating revenues increased 11.5% year over year to $3.5 billion due to increased premiums and other considerations. The metric surpassed the Zacks Consensus Estimate by 0.3%.
Principal Financial witnessed soft performance across most segments and higher expenses, offset by improving asset under management (AUM) and higher revenues in Retirement and Income Solution and Benefits and Protection businesses.
Principal Financial Group, Inc. Price, Consensus and EPS Surprise
Total expenses increased 15.2% year over year to $3.1 billion due to higher benefits, claims and settlement expenses. The figure was higher than our estimate of $3 billion.
As of Jun 30, 2023, Principal Financial’s AUM amounted to $674 billion, up 6.7% year over year.
Segment Update
Retirement and Income Solution: Revenues increased 27% year over year to $1.7 billion because of higher premiums and other considerations, fees and net investment income. The figure beat our estimate by 6.3%.
Pre-tax operating earnings decreased 8.8% year over year to $232.3 million, primarily due to lower net revenues.
Principal Global Investors: Revenues of $390.1 million were down 15.9% from the prior-year quarter due to lower fees and other revenues.
Pre-tax operating earnings decreased 30.6% year over year to $125 million due to lower operating revenues less pass-through expenses.
Principal International: Revenues decreased 32% year over year to $302.3 million in the quarter due to lower premiums and other considerations and net investment income.
Pre-tax operating earnings decreased 29.3% year over year to $63.2 million, driven by lower combined net revenues. The figure lagged our estimate by 20%.
Benefits and Protection: Revenues increased 24.6% year over year to $1.1 billion owing to higher net investment income, fees and other revenues. The metric lagged our estimate by a whisker.
Pre-Tax operating earnings of $124.9 million decreased 20.7% year over year, mainly due to lower net investment income in the Life Insurance business. The metric lagged our estimate by 19.9%.
Corporate: Operating loss of $97.4 million was narrower than $152.9 million loss incurred a year ago. This decrease was due to higher net investment income. The figure was narrower than our estimate of a loss of $106.4 million.
Financial Update
As of Jun 30, 2023, cash and cash equivalents were $4,073.9 million, down from $4,848 million at 2022-end.
At the second-quarter end, debt was $3,992.9 billion, down from $3,997 million at 2022-end. As of Jun 30, 2023, book value per share (excluding AOCI other than foreign currency translation adjustment) was $52.45, up from $50.92 at 2022-end.
Dividend and Share Repurchase Update
Principal Financial paid out $154.9 million in dividends and deployed $100 million to buy back 1.4 million shares in the second quarter.
The board of directors declared third-quarter dividend of 65 cents per share, 2% higher than the previous dividend of 64 cents. The dividend will be paid out on Sep 29, 2023, to shareholders of record as of Sep 7.
Of the other Finance sector players that have reported second-quarter results so far, the bottom-line results of Synchrony Financial (SYF - Free Report) , American Express Company (AXP - Free Report) and Morgan Stanley (MS - Free Report) beat the respective Zacks Consensus Estimate.
Synchrony Financial reported second-quarter 2023 adjusted earnings per share (EPS) of $1.32, which beat the Zacks Consensus Estimate of $1.22. However, the bottom line plunged 17.5% year over year. Net interest income of SYF improved 8.4% year over year to $4,120 million, beating the consensus mark by 0.6%.
Other income of Synchrony Financial amounted to $61 million, which dropped 69.2% year over year in the second quarter. Total loan receivables grew 14.7% year over year to $94.8 billion. The purchase volume advanced 0.1% year over year to $47,276 million in the second quarter.
American Express reported second-quarter 2023 EPS of $2.89, beating the Zacks Consensus Estimate by 3.2%. The bottom line increased 12.5% year over year. For the quarter under review, AXP’s total revenues, net of interest expense, increased 12.4% year over year to $15,054 million.
However, the top line missed the consensus estimate by 2.3%. Network volumes jumped 8% year over year to $426.6 billion in the second quarter. Total interest income was $4,775 million in the second quarter, up 71% year over year. The International Card Services segment recorded a pre-tax income of $253 million, up 38% from a year ago.
Morgan Stanley’s second-quarter 2023 EPS of $1.24 surpassed the Zacks Consensus Estimate of earnings of $1.14 per share. However, the bottom line reflects a decline of 11% from the year-ago quarter. Net revenues were $13.46 billion, up 2% from the prior-year quarter.
The top line beat the consensus estimate of $12.76 billion. While equity and fixed income underwriting fees increased 52% and 21%, respectively, from the prior-year quarter, advisory fees declined 24%. Therefore, total investment banking fees increased only marginally from the prior-year quarter. Fixed-income trading revenues of MS decreased 31%, and equity trading income declined 14% year over year.
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Principal Financial (PFG) Q2 Earnings Miss on Higher Expenses
Principal Financial Group, Inc.’s (PFG - Free Report) second-quarter 2023 operating net income of $1.53 per share missed the Zacks Consensus Estimate by 7.8%. Also, the bottom line decreased 7.3% year over year.
Operating revenues increased 11.5% year over year to $3.5 billion due to increased premiums and other considerations. The metric surpassed the Zacks Consensus Estimate by 0.3%.
Principal Financial witnessed soft performance across most segments and higher expenses, offset by improving asset under management (AUM) and higher revenues in Retirement and Income Solution and Benefits and Protection businesses.
Principal Financial Group, Inc. Price, Consensus and EPS Surprise
Principal Financial Group, Inc. price-consensus-eps-surprise-chart | Principal Financial Group, Inc. Quote
Behind the Headlines
Total expenses increased 15.2% year over year to $3.1 billion due to higher benefits, claims and settlement expenses. The figure was higher than our estimate of $3 billion.
As of Jun 30, 2023, Principal Financial’s AUM amounted to $674 billion, up 6.7% year over year.
Segment Update
Retirement and Income Solution: Revenues increased 27% year over year to $1.7 billion because of higher premiums and other considerations, fees and net investment income. The figure beat our estimate by 6.3%.
Pre-tax operating earnings decreased 8.8% year over year to $232.3 million, primarily due to lower net revenues.
Principal Global Investors: Revenues of $390.1 million were down 15.9% from the prior-year quarter due to lower fees and other revenues.
Pre-tax operating earnings decreased 30.6% year over year to $125 million due to lower operating revenues less pass-through expenses.
Principal International: Revenues decreased 32% year over year to $302.3 million in the quarter due to lower premiums and other considerations and net investment income.
Pre-tax operating earnings decreased 29.3% year over year to $63.2 million, driven by lower combined net revenues. The figure lagged our estimate by 20%.
Benefits and Protection: Revenues increased 24.6% year over year to $1.1 billion owing to higher net investment income, fees and other revenues. The metric lagged our estimate by a whisker.
Pre-Tax operating earnings of $124.9 million decreased 20.7% year over year, mainly due to lower net investment income in the Life Insurance business. The metric lagged our estimate by 19.9%.
Corporate: Operating loss of $97.4 million was narrower than $152.9 million loss incurred a year ago. This decrease was due to higher net investment income. The figure was narrower than our estimate of a loss of $106.4 million.
Financial Update
As of Jun 30, 2023, cash and cash equivalents were $4,073.9 million, down from $4,848 million at 2022-end.
At the second-quarter end, debt was $3,992.9 billion, down from $3,997 million at 2022-end. As of Jun 30, 2023, book value per share (excluding AOCI other than foreign currency translation adjustment) was $52.45, up from $50.92 at 2022-end.
Dividend and Share Repurchase Update
Principal Financial paid out $154.9 million in dividends and deployed $100 million to buy back 1.4 million shares in the second quarter.
The board of directors declared third-quarter dividend of 65 cents per share, 2% higher than the previous dividend of 64 cents. The dividend will be paid out on Sep 29, 2023, to shareholders of record as of Sep 7.
Zacks Rank
Principal Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Sector Releases
Of the other Finance sector players that have reported second-quarter results so far, the bottom-line results of Synchrony Financial (SYF - Free Report) , American Express Company (AXP - Free Report) and Morgan Stanley (MS - Free Report) beat the respective Zacks Consensus Estimate.
Synchrony Financial reported second-quarter 2023 adjusted earnings per share (EPS) of $1.32, which beat the Zacks Consensus Estimate of $1.22. However, the bottom line plunged 17.5% year over year. Net interest income of SYF improved 8.4% year over year to $4,120 million, beating the consensus mark by 0.6%.
Other income of Synchrony Financial amounted to $61 million, which dropped 69.2% year over year in the second quarter. Total loan receivables grew 14.7% year over year to $94.8 billion. The purchase volume advanced 0.1% year over year to $47,276 million in the second quarter.
American Express reported second-quarter 2023 EPS of $2.89, beating the Zacks Consensus Estimate by 3.2%. The bottom line increased 12.5% year over year. For the quarter under review, AXP’s total revenues, net of interest expense, increased 12.4% year over year to $15,054 million.
However, the top line missed the consensus estimate by 2.3%. Network volumes jumped 8% year over year to $426.6 billion in the second quarter. Total interest income was $4,775 million in the second quarter, up 71% year over year. The International Card Services segment recorded a pre-tax income of $253 million, up 38% from a year ago.
Morgan Stanley’s second-quarter 2023 EPS of $1.24 surpassed the Zacks Consensus Estimate of earnings of $1.14 per share. However, the bottom line reflects a decline of 11% from the year-ago quarter. Net revenues were $13.46 billion, up 2% from the prior-year quarter.
The top line beat the consensus estimate of $12.76 billion. While equity and fixed income underwriting fees increased 52% and 21%, respectively, from the prior-year quarter, advisory fees declined 24%. Therefore, total investment banking fees increased only marginally from the prior-year quarter. Fixed-income trading revenues of MS decreased 31%, and equity trading income declined 14% year over year.