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Can Solid Segments Aid Principal Financial (PFG) Q3 Earnings?

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Principal Financial Group, Inc. (PFG - Free Report) is slated to report third-quarter 2018 results on Oct 25, after the market closes. Last reported quarter, the company came up with a negative surprise of 2.17%.

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

Factors to be Considered for Third Quarter

Principal Financial is likely to have continued to benefit from solid retirement and long-term savings, group benefits and protection in the United States, retirement and long-term savings in Latin America and Asia as well as an improving global asset management.

The company has possibly witnessed top-line growth in the soon-to-be-reported quarter, fueled by its fee-based revenues, improved segmental revenue growth and an increase in investment income. The Zacks Consensus Estimate for revenues is pegged at $3.6 billion.

An improving rate environment, supported by an accelerated pace in rate hikes, has probably driven net investment income.

Solid asset management might have supported earnings growth in the third quarter. Assets under management are expected to have consistently benefited from an extensive distribution foothold, operational discipline and strategic acquisitions. Better results are anticipated across all the asset management and asset accumulation segments.

Steady share repurchases lowering share count and reduction in tax incidence should have lent an additional cushion to the bottom line.

The Zacks Consensus Estimate for earnings stands at $1.65 per share, up 28.9% year over year.

However, an expected increase in total expenses due to higher benefits, claims and settlement expenses as well as operating costs must have restricted 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 reporting season. 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.

Earnings 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 $1.65. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Principal Financial Group, Inc. Price and EPS Surprise

Zacks Rank: Principal Financial carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

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:

Cboe Global Markets, Inc. (CBOE - Free Report) is set to report third-quarter earnings on Nov 2. The stock has an Earnings ESP of +0.91% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +2.46% and a Zacks Rank #3. The company is slated to release third-quarter earnings on Oct 30.

Ameriprise Financial, Inc. (AMP - Free Report) has an Earnings ESP of +4.30% and a Zacks Rank of 2. The company will announce third-quarter earnings on Oct 23.

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