Earnings Preview: Principal Financial Group

| About: Principal Financial (PFG)

Principal Financial Group (NYSE:PFG) is slated to report Q1 earnings after the market close on Monday, May 4, with a conference call scheduled for Tuesday, May 5 at 10:00 am ET.


Analysts are looking for EPS of 66c on revenue of $2.51B. The consensus range is 57c-74c for EPS, and $2.45B-$2.59B for revenue, according to First Call.

Analyst Views

Several analysts and observers have been more optimistic about Principal Financial's prospects in recent weeks, following some pessimistic assessments by analysts in March. Fox-Pitt Kelton initiated shares of Principal Financial Group with an Outperform rating on April 22. The firm believes the company has "one of the most valuable franchises" in the life insurance industry, while its core fundamentals of its pension and asset management businesses are still largely intact. While Fox-Pitt thinks the company needs $1B more in capital, it forecasts that the company will be able to raise the required amount.

Principal Financial Group has been "unduly punished for the sins of its peers" over the past year, Barron's contended on April 19. The paper noted that the company's stock had dropped more than its peers over the previous year on fears of dilution over a possible capital infusion from TARP, and a Moody's downgrade. But Barron's maintained that Principal Financial's valuation is conservative, while it's underexposed to the dangerous guarantees that are often paired with variable annuities. Meanwhile, the publication quotes Bernstein as predicting that Principal shares will outperform the S&P 500 in the next six to 12 months by more than 15%. The firm, which believes that the company will not need to accept TARP funds, has a $22 target on the stock.

Still, Moody's downgraded Principal Financial's senior debt rating to A3 from A2 on March 18. The ratings agency said that unfavorable capital market conditions will hinder the company's ability to refinance its short-term debt. As a result, the company has reduced "financial flexibility," Moody's said. Principal Financial will also have to cope with tighter liquidity and depressed earnings, since it's highly sensitive to the equity markets and the economy, Moody's added.

On March 31, FBR Capital downgraded the company to Underperform from Market Perform, citing the impact of government initiatives.

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Tagged: , Asset Management, Earnings
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