We have retained our Neutral recommendation on
Principal Financial Group Inc.
) as the low interest rate environment is expected to weigh on
the positives of the company. The provider of an expansive range
of retirement savings, investment and insurance products and
services currently carries a Zacks #3 Rank (Hold).
ENSTAR GROUP LT (ESGR): Free Stock Analysis
PRINCIPAL FINL (PFG): Free Stock Analysis
RADIAN GRP INC (RDN): Free Stock Analysis
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There was no earrings momentum over the last 30 days. Principal
Financial is scheduled to release its fourth quarter and full
year 2012 results on February 1 after the closing bell. The
Zacks Consensus Estimates for the fourth quarter and 2012 are
currently pegged at 75 cents per share and $2.62 per share,
respectively. The estimates translate into a year-over-year
increase of nearly 5% for the fourth quarter, while a decline of
5% for 2012.
The third quarter experienced lower net investment income largely
attributable to lower investment yields in the U.S. operations
and lower inflation-based investment returns on average invested
assets and cash resulting from lower inflation in Chile. Earlier,
Principal estimated the 2012 operating earnings to be affected by
1%-2%, if the low interest rate environment persists. The impact
may increase by 3%-8%, if it persists longer.
Nevertheless, counting on the positives, Principal's assets under
management continues to show strong improvement. It grew 22% year
over year as of September 30, 2012 driven by better results at
its three asset management and asset accumulation segments.
The company also made progress in its Cuprum deal. In December,
it initiated a bid to acquire AFP Cuprum S.A. for $1.39 billion.
This acquisition will not only widen its presence in the emerging
marketplace but also marks the sixth transaction in the past two
years that increases its focus on fee-based business.
Principal Financial continues to increase shareholders value. For
2013, the company intends to utilize $400-$600 million for
quarterly dividends, strategic acquisitions and share buybacks.
Till November 2012, Principal Financial had spent $2.1 billion in
share buybacks, dividends and acquisitions. The company also
strongly scores with the credit rating agencies.
Other Stock to Consider
Although we have a cautious stance on Principal Financial, other
Enstar Group Ltd
Radian Group Inc.
), which carry a Zacks #1 Rank (Strong Buy), are worth