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Should You Retain Principal Financial (PFG) in Your Portfolio?

Principal Financial Group, Inc. PFG continues to be an investor favorite on the back of its solid investment performance, higher single premium annuity sales and effective capital deployment

Growth Projections

The Zacks Consensus Estimate for Principal Financial 2022 earnings per share is pegged at $7.07, indicating an increase of 8% from the corresponding year-ago reported figure. The expected long-term earnings growth rate is pegged at 16.9%.

Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has moved 0.5% north in the past seven 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 rallied 47.2%, outperforming the industry’s increase of 9.4% in the past year.

Image Source: Zacks Investment Research

Earnings Surprise History

Principal Financial has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average beat being 8.56%.

Style Score

Principal Financial is well poised for progress, as is evident from its favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Riding on higher premiums and other considerations, fees and other revenues and higher net investment income across Principal Financial’s segments, the top line of Principal Financial is expected to improve in the long run. The Zacks Consensus Estimate for Principal Financial’s 2022 revenues is pegged at $15.1 billion, indicating a year-over-year increase of 6.7%.

Principal International is likely to benefit from higher single premium annuity sales in Chile.  The segment’s operating earnings should gain from foreign currency tailwinds.

The investment manager guided the revenues of Principal International to grow in the range of 8% to 10% in 2021. The third quarter of 2021 marked the 52nd consecutive quarter of positive cash flow.

With positive net cash flow over the trailing 12 months, strong investment performance and the migration of institutional retirement and trust retirement assets, Principal Financial’s assets under management should continue to gain.

Principal Financial continues to maintain a robust financial position with $2.5 billion of excess and available capital that includes $1.8 billion at the holding company, which is $1 billion higher than the targeted $800 million to cover the next 12 months of obligations, $190 million in excess of the targeted 400% risk-based capital ratio, which was estimated to be 412% as well as $500 million of available cash in its subsidiaries.

PFG maintained a leverage ratio of 20-25% and expects to pay down $300 million of long-term debt when it matures in late 2022.

PFG hiked its dividend by 13% in the third quarter and currently yields 3.4%, better than the industry average of 2.2%. It continues to target a 40% dividend payout ratio.

Banking on a solid capital management strategy, it remains on track to return $3 billion of excess capital to shareholders by 2022 end. PFG targets a return on equity of 15% by year-end 2023, as it deploys capital to higher-return businesses, returns excess capital to shareholders and grows earnings.

The investment manager remains committed to returning $3 billion by the end of 2022 including $1.4 billion to $1.8 billion of share repurchases and $1.3 billion to $1.4 billion in common stock dividends.

Stocks to Consider

Some better-ranked stocks from the finance sector are Atlas ATCO, BrightSphere Investment Group BSIG and Ameriprise Financial AMP. While Atlas and BrightSphere Investment sport a Zacks Rank #1 (Strong Buy), Ameriprise carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atlas’s earnings surpassed the Zacks Consensus Estimate in three of the last four quarters and missed in one, the average beat being 25.67%. In the past year, ATCO has surged 26%. The Zacks Consensus Estimate for ATCO’s 2022 earnings has moved 10.1% north in the past 60 days. Atlas’s expected long-term earnings growth rate is pegged at 27.9%, higher than the industry average of 17.7%. The Zacks Consensus Estimate for 2022 earnings indicates 6.9% year-over-year growth.

BrightSphere Investment’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 2.33%. In the past year, BSIG has gained 17.4%. The Zacks Consensus Estimate for BSIG’s 2022 earnings has moved 2.1% north in the past seven days. The Zacks Consensus Estimate for 2022 earnings indicates 68.3% year-over-year growth.

Ameriprise Financial’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 6.46%. In the past year, Ameriprise Financial has rallied 58.4%. The Zacks Consensus Estimate for AMP’s 2022 earnings has moved 1.1% north in the past seven days. The Zacks Consensus Estimate for 2022 earnings indicates 10.5% year-over-year growth.


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Ameriprise Financial, Inc. (AMP): Free Stock Analysis Report
 
Principal Financial Group, Inc. (PFG): Free Stock Analysis Report
 
BrightSphere Investment Group Inc. (BSIG): Free Stock Analysis Report
 
Atlas Corp. (ATCO): Free Stock Analysis Report
 
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