It has been about a month since the last earnings report for Principal Financial (PFG). Shares have lost about 2.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Principal Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Principal Financial Q1 Earnings Beat, Revenues Miss
Principal Financial’s first-quarter 2019 operating net income of $1.43 per share beat the Zacks Consensus Estimate by 11.3%. Also, the bottom line increased 2.1% year over year.
Principal Financial recorded growth in assets under management (AUM). The company’s investment performance also remained solid. It was able to maintain disciplined expense management. Moreover, the company displayed a balanced approach to capital management.
Behind the Headlines
Operating revenues rose 25.8% year over year to $3.7 billion. Higher premiums and other considerations plus net investment income drove this upside. The top line however missed the Zacks Consensus Estimate by 0.07%.
Total expenses increased 32.6% year over year to $3.2 billion due to higher benefits, claims and settlement expenses as well as operating expenses.
Principal Financial’s Asset Under Management (AUM) as of Mar 31, 2019 amounted to $675.4 billion, up 0.3% year over year.
Retirement and Income Solution: Revenues surged nearly 60.5% year over year to about $1.9 billion
Pre-tax operating earnings decreased 1.4% year over year to $240.6 million on account of weak performance at Retirement and Income Solution — Fee as well as Spread business.
Principal Global Investors: Revenues of $339 million were down 8% from the prior-year quarter.
Operating earnings declined 11.4% year over year to $100.7 million due to lower revenues.
Principal International: Revenues fell 0.7% year over year to $380.5 million in the quarter.
Operating earnings increased 21.4% year over year to $111.1 million driven by growth in the business, favorable encaje performance and Latin American inflation.
U.S. Insurance Solution: Revenues grew 5.1% year over year to $1.1 billion.
Operating earnings of $110.7 million declined 3.7% year over year, mainly due to soft performance at Specialty Benefits Insurance business.
Corporate: Operating loss of $84.4 million was wider than $67.6 million loss incurred a year ago. This downside was attributable to higher expenses.
As of Mar 31, 2019, cash and cash equivalents were $2.9 billion, down 3.3% year over year.
At first-quarter end, debt was $3.3 billion, up 0.4% year over year.
As of Mar 31, 2019, book value per share (excluding AOCI other than foreign currency translation adjustment) was $42.74, up 4.7% year over year.
Dividend and Share Repurchase Update
The company paid $150.2 million in dividends and deployed $129.7 million to buy back 2.7 million shares in the quarter under review.
The board of directors approved second-quarter dividend of 54 cents per share, up 8% year over year.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
Currently, Principal Financial has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Principal Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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