Principal Financial Group, Inc. PFG has been favored by investors on the back of its strategic buyouts, strong retention, higher single premium annuity sales and effective capital deployment.

Optimistic Growth Projections

The Zacks Consensus Estimate for Principal Financial’s 2024 earnings per share indicates a year-over-year increase of 14.5%. The consensus estimate for revenues is pegged at $15.60 billion, implying a year-over-year improvement of 6.3%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 13.3% and 5.9%, respectively, from the corresponding 2024 estimates.

Northbound Estimate Revision

The Zacks Consensus Estimate for PFG’s 2024 and 2025 earnings has moved 0.1% and 0.2% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.

Zacks Rank & Price Performance

Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has gained 5.1% compared with the industry’s growth of 28.4% over the past year. Zacks Investment Research

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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 the first quarter of 2024 with $1.4 billion of excess and available capital. It includes $1.1 billion at the holding company, which was above the $800 million targeted level and $300 million in subsidiaries. The risk-based capital (RBC) ratio was 400%, which was in line with the targeted RBC ratio. The estimated statutory RBC ratio for Principal Life Insurance Company of 400% was in line with the targeted RBC ratio. For 2024, PFG remains well-positioned to deliver on enterprise long-term financial targets, with 9-12% growth in earnings per share and 75-85% free capital flow conversion.

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.

PFG remains committed to returning excess capital to shareholders and continues to expect $1.5 billion to $1.8 billion of capital deployment for 2024, including $800 million to $1.1 billion of share repurchases. In February 2024, the board authorized a share repurchase program of up to $1.5 billion of outstanding common stock, which has no expiration date. Based on net income, excluding exited business, the company targets 35-45% share repurchases in 2024.

However, Principal Financial’s expenses have been increasing since 2013 due to a rise in benefits, claims, and settlement expenses as well as operating costs. An increase in expenses weighs on its margins. The company must remain focused on managing expenses to prevent margin erosion.



Stocks to Consider

Some better-ranked stocks from the Financial - Investment Management sector are BrightSphere Investment Group Inc. BSIG, Ameriprise Financial, Inc. AMP, and SEI Investments Company SEIC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BrightSphere Investment has a solid track record of beating earnings estimates in three of the trailing four quarters and matching in one, the average being 29.34%. In the past year, shares of BSIG have gained 3.6%.

The Zacks Consensus Estimate for BSIG’s 2024 and 2025 earnings implies year-over-year growth of 24.7% and 14.8%, respectively.

Ameriprise Financial has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 2%. In the past year, shares of AMP have gained 29.8%.

The Zacks Consensus Estimate for AMP’s 2024 and 2025 earnings implies year-over-year growth of 14.7% and 9.2%, respectively.

SEI Investments has a solid track record of beating earnings estimates in two of the trailing four quarters and matching in the other two, the average being 1.69%. In the past year, shares of SEIC have gained 8.6%.

The Zacks Consensus Estimate for SEIC’s 2024 and 2025 earnings implies year-over-year growth of 19.6% and 7.8%, respectively.

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Ameriprise Financial, Inc. (AMP):Free Stock Analysis Report

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