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Here's Why You Should Retain Principal Financial (PFG) Stock

Principal Financial Group, Inc. PFG has been favored by investors on the back of its positive net cash flow, favorable claims and disciplined expense management, strategic buyouts and effective capital deployment.

Optimistic Growth Projections

The Zacks Consensus Estimate for Principal Financial’s 2024 earnings is pegged at $7.38 per share, indicating a 14.9% increase from the year-ago reported figure on 4.4% higher revenues of $14.60 billion.

Zacks Rank & Price Performance

Principal Financial currently carries a Zacks Rank #3 (Hold). The stock has lost 19.7% against the industry’s rise of 6.2% in the past year.

Zacks Investment Research
Zacks Investment Research


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Earnings Surprise History

PFG has a decent earnings surprise history. It beat estimates in two of the last four quarters while missed in the other two, the average being 1.09%.

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 higher 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. By the end of the second quarter, its excess and available capital were $1.4 billion, including more than $940 million at the holding company, $360 million in subsidiaries and $50 million in excess of targeted 400% risk-based capital ratio (RBC). The estimated statutory RBC ratio for Principal Life Insurance Company of 407% is above the midpoint of the targeted RBC ratio range of 400%.

Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive. The board approved a 3.1% hike in its dividend. This is in line with the targeted 40% dividend payout ratio and reflects strong business performance. It also boasts a solid dividend yield of 3.6%, which compares favorably with the industry average of 2.8%.

The company paid back more than $350 million to shareholders in the third quarter through $200 million of share repurchases and $156 million of common stock dividends. PFG aims to return $1.3 billion of capital to shareholders in 2023.

Stocks to Consider

Some better-ranked stocks from the finance sector are Prospect Capital Corporation PSEC, Capital Southwest Corporation CSWC and Globe Life GL. While Prospect Capital sports a Zacks Rank #1 (Strong Buy), Capital Southwest and Globe Life carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Prospect Capital’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 17.33%. In the past year, PSEC has lost 25.1%.

The Zacks Consensus Estimate for PSEC’s 2023 and 2024 revenues indicates 8.8% and 3.9% year-over-year growth, respectively.

Capital Southwest’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 6.58%. In the past year, CSWC has gained 23.3%.

The Zacks Consensus Estimate for CSWC’s 2023 and 2024 earnings indicates 16.5% and 1.3% year-over-year growth, respectively.

Globe Life’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 2.25%. In the past year, GL has gained 3.2%.

The Zacks Consensus Estimate for GL’s 2023 and 2024 earnings indicates 30% and 7.9% year-over-year growth, respectively.

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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report

Prospect Capital Corporation (PSEC) : Free Stock Analysis Report

Capital Southwest Corporation (CSWC) : Free Stock Analysis Report

Globe Life Inc. (GL) : Free Stock Analysis Report

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