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Here's Why Principal Financial (PFG) Is a Solid Pick Now
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Principal Financial Group, Inc. (PFG - Free Report) is well-poised to gain on the back of its strategic buyouts, positive net cash flow, growth in business, higher single premium annuity sales and effective capital deployment.
Optimistic Growth Projections
The Zacks Consensus Estimate for Principal Financial’s 2024 earnings per share is pegged at $7.61, indicating a year-over-year increase of 16.1%. The consensus estimate for revenues is $15.41 billion, implying a rise of 5%.
The Zacks Consensus Estimate for 2025 earnings per share is pegged at $8.35, indicating a year-over-year rise of 9.6%. The consensus estimate for revenues is $16.31 billion, implying an increase of 5.8%.
Northbound Estimate Revision
The Zacks Consensus Estimate for PFG’s 2024 and 2025 earnings has moved 0.3% and 0.4% north, respectively, in the past seven days. This should instill investors' confidence in the stock.
Zacks Rank & Price Performance
Principal Financial currently carries a Zacks Rank #2 (Buy). The stock has gained 8.8% compared with the industry’s growth of 39.7% over the past year.
Image Source: Zacks Investment Research
Earnings Surprise History
PFG has a decent earnings surprise history. It beat estimates in two of the last four quarters and missed in the other two, the average being 0.04%.
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 improved net investment income across its segments.
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.
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.
Strong institutional flows across equities, real estate and specialty fixed income, highlighting the value of diversified distribution through its institutional, retail and retirement channels, are likely to drive positive net cash flow.
Principal Financial’s extensive distribution footprint, strategic buyouts and operational discipline should enhance the assets under management growth.
PFG boasts a strong capital position, with sufficient cash generation capabilities and liquidity. The company ended 2023 with $1.7 billion of excess and available capital. It includes around $935 million at the holding company, $375 million in subsidiaries and $375 million in excess of the targeted 400% risk-based capital ratio (RBC), which was 427% at the end of the same year. The estimated statutory RBC ratio for Principal Life Insurance Company of 427% is above the midpoint of the targeted RBC ratio range of 400%.
The insurer’s capital deployment through share buybacks and dividend payments looks impressive. The board raised the first-quarter 2024 dividend by 4%, bringing the trailing 12-month dividend to $2.65 per share. The increase is in line with the targeted 40% dividend payout ratio and reflects strong business performance. It also boasts a solid dividend yield of 3.3%, which compares favorably with the industry average of 2.4%.
PFG remains committed to returning excess capital to shareholders and targets $1.5 billion to $1.8 billion of capital deployments in 2024. As of Dec 31, 2023, approximately $0.3 billion remained under the company’s prior authorization.
Other Stocks to Consider
Some other top-ranked stocks from the Financial - Investment Management sector are AssetMark Financial Holdings, Inc. (AMK - Free Report) , SEI Investments Company (SEIC - Free Report) and PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) . While AssetMark Financial sports a Zacks Rank #1 (Strong Buy), SEI Investments and PennantPark carry a Zacks Rank #2 each at present. You can seethe complete list of today’s Zacks #1 Rank stocks here.
AssetMark Financial’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, the average being 0.81%. In the past year, AssetMark Financial has jumped 18.9%.
The Zacks Consensus Estimate for AMK’s 2024 and 2025 earnings indicates 13.4% and 5.4% year-over-year growth, respectively.
SEI Investments’ earnings surpassed estimates in one of the last four quarters, matched in the other two and missed in one, the average surprise being 0.26%. In the past year, SEIC has gained 24.5%.
The Zacks Consensus Estimate for SEIC’s 2024 and 2025 earnings indicates 14.7% and 7.6% year-over-year growth, respectively.
PennantPark’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 8.78%. In the past year, PFLT has gained 9.3%.
The Zacks Consensus Estimate for PFLT’s 2023 and 2024 earnings has moved 3.2% and 3.2% north, respectively, in the past 60 days.
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Here's Why Principal Financial (PFG) Is a Solid Pick Now
Principal Financial Group, Inc. (PFG - Free Report) is well-poised to gain on the back of its strategic buyouts, positive net cash flow, growth in business, higher single premium annuity sales and effective capital deployment.
Optimistic Growth Projections
The Zacks Consensus Estimate for Principal Financial’s 2024 earnings per share is pegged at $7.61, indicating a year-over-year increase of 16.1%. The consensus estimate for revenues is $15.41 billion, implying a rise of 5%.
The Zacks Consensus Estimate for 2025 earnings per share is pegged at $8.35, indicating a year-over-year rise of 9.6%. The consensus estimate for revenues is $16.31 billion, implying an increase of 5.8%.
Northbound Estimate Revision
The Zacks Consensus Estimate for PFG’s 2024 and 2025 earnings has moved 0.3% and 0.4% north, respectively, in the past seven days. This should instill investors' confidence in the stock.
Zacks Rank & Price Performance
Principal Financial currently carries a Zacks Rank #2 (Buy). The stock has gained 8.8% compared with the industry’s growth of 39.7% over the past year.
Image Source: Zacks Investment Research
Earnings Surprise History
PFG has a decent earnings surprise history. It beat estimates in two of the last four quarters and missed in the other two, the average being 0.04%.
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 improved net investment income across its segments.
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.
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.
Strong institutional flows across equities, real estate and specialty fixed income, highlighting the value of diversified distribution through its institutional, retail and retirement channels, are likely to drive positive net cash flow.
Principal Financial’s extensive distribution footprint, strategic buyouts and operational discipline should enhance the assets under management growth.
PFG boasts a strong capital position, with sufficient cash generation capabilities and liquidity. The company ended 2023 with $1.7 billion of excess and available capital. It includes around $935 million at the holding company, $375 million in subsidiaries and $375 million in excess of the targeted 400% risk-based capital ratio (RBC), which was 427% at the end of the same year. The estimated statutory RBC ratio for Principal Life Insurance Company of 427% is above the midpoint of the targeted RBC ratio range of 400%.
The insurer’s capital deployment through share buybacks and dividend payments looks impressive. The board raised the first-quarter 2024 dividend by 4%, bringing the trailing 12-month dividend to $2.65 per share. The increase is in line with the targeted 40% dividend payout ratio and reflects strong business performance. It also boasts a solid dividend yield of 3.3%, which compares favorably with the industry average of 2.4%.
PFG remains committed to returning excess capital to shareholders and targets $1.5 billion to $1.8 billion of capital deployments in 2024. As of Dec 31, 2023, approximately $0.3 billion remained under the company’s prior authorization.
Other Stocks to Consider
Some other top-ranked stocks from the Financial - Investment Management sector are AssetMark Financial Holdings, Inc. (AMK - Free Report) , SEI Investments Company (SEIC - Free Report) and PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) . While AssetMark Financial sports a Zacks Rank #1 (Strong Buy), SEI Investments and PennantPark carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AssetMark Financial’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, the average being 0.81%. In the past year, AssetMark Financial has jumped 18.9%.
The Zacks Consensus Estimate for AMK’s 2024 and 2025 earnings indicates 13.4% and 5.4% year-over-year growth, respectively.
SEI Investments’ earnings surpassed estimates in one of the last four quarters, matched in the other two and missed in one, the average surprise being 0.26%. In the past year, SEIC has gained 24.5%.
The Zacks Consensus Estimate for SEIC’s 2024 and 2025 earnings indicates 14.7% and 7.6% year-over-year growth, respectively.
PennantPark’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average being 8.78%. In the past year, PFLT has gained 9.3%.
The Zacks Consensus Estimate for PFLT’s 2023 and 2024 earnings has moved 3.2% and 3.2% north, respectively, in the past 60 days.