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Principal Financial (PFG) Q1 Earnings: What's in Store?

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Principal Financial Group, Inc. (PFG - Free Report) is slated to report first-quarter 2018 results on Apr 26 after the market closes. Last quarter, the company delivered a negative surprise of 13.14%.

Let’s see, how things are shaping up for this announcement.

Factors to be Considered This Quarter

Principal Financial is likely to report top-line growth in the soon-to-be-reported quarter, fueled by its fee-based revenue sources and an improved investment income. The Zacks Consensus Estimate for revenues is pegged at $3.5 billion, representing an increase of 15.5% on a year-over-year basis.

Moreover, the company’s bottom line is anticipated to have benefitted from better-than-expected performance at fee, spread and risk businesses. Also, share buybacks are likely to have cushioned the company’s bottom line. The Zacks Consensus Estimate for earnings is pegged at $1.35 per share, reflecting a 6.3% rise from the year-ago quarter.

Additionally, the tax cut, which reduced the tax rate to 21% from 35%, will aid the companies’ bottom line, thereby boosting margins directly.

It is important to mention here that the company acknowledges the first quarter to be the lowest period for earnings attributable to dental and vision claims at Specialty Benefits plus the elevated payroll taxes at Principal Global Investors.

Better performance in asset management and asset accumulation segments owing to core growth as well as strategic acquisitions are estimated to have improved assets under management.

However, the company is likely to witness an increase in total expenses, primarily due to higher benefits, claims and settlement expenses as well as operating expenses. This in turn is expected to restrict the company’s desired operating margin expansion.

 

What Our Quantitative Model Predicts

Our proven model does not conclusively show that Principal Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Principal Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.35. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Principal Financial carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. We caution against Sell-rated stocks (4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the right combination of elements to surpass estimates this time around are as follows:

Kemper Corporation (KMPR - Free Report) is set to report first-quarter earnings on Apr 30. The stock has an Earnings ESP of +23.79% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +3.79% and a Zacks Rank of 3. The company is scheduled to announce first-quarter earnings on May 1.

American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank #2. The company is slated to release first-quarter earnings on May 2.

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