On Apr 10, 2013, shares of
Principal Financial Group Inc
) hit a 52-week of $34.88.
The investment manager has remained focused to grow
inorganically. On Mar 4, Principal Global Investors, LLC, the
investment arm of Principal Financial agreed to purchase 55%
shares of Liongate Capital Management in an effort to expand its
alternative investment capabilities. Principal Financial also
closed the acquisition of Chile-based AFP Cuprum S.A. in
February. The acquisition fortifies Principal's leading position
in providing retirement products in Chile. Principal Financial
expects the Cuprum acquisition to be accretive to earnings by 12
cents a share in 2013 and 23 cents per share in 2014 along with
75 basis points of accretion to return on equity in this year and
The company's asset under management is exhibiting a steady
uptrend driven by better results at three asset management and
asset accumulation segments.
In addition, in February, Fitch Ratings reiterated the long-term
Issuer Default Rating (IDR) of Principal Financial at 'A'.
Concurrently, the rating agency reiterated the Insurer Financial
Strength (IFS) at 'AA-' of the operating subsidiaries. The rating
affirmations accounted for Principal Financial's sturdy
capitalization and continued solid operational performance.
With respect to earnings trend, Principal Financial managed to
deliver positive earnings surprise only in the last quarter of
2012. Nevertheless, our proven model shows that the investment
manager is likely to beat earnings in the first quarter of 2013
because it has a right combination of a positive Earnings ESP
Zacks Earnings ESP: A Better Method
) and Zacks Rank. ESP or Expected Surprise Prediction,
which represents the difference between the Most Accurate
Estimate and the Zacks Consensus Estimate is at +2.70%. Principal
Financial presently carries a Zacks Rank #2 (Buy).
Principal Financial is scheduled to release its first-quarter
2013 earnings on Apr 25 after the market closes.
Valuation for Principal Financial looks reasonable. The shares
are trading at a discount to the peer group average both on a
price-to-book basis (16.7% discount to peer group) and on a
forward price-to-earnings basis (17.6% discount to peer group)
with return on equity 8.8% lower than the peer group average. The
1-year return from the stock is 18.8%, above S&P's return of
AllianceBernstein Holding L.P
Apollo Global Management, LLC
) among others carry a Zacks Rank #1 (Strong Buy), while
Ameriprise Financial Inc.
) carries a Zacks Rank #2 (Buy).
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