Shares of Principal Financial Group, Inc.PFG rallied 13.27% year to date, outperforming the Zacks categorized Investment Management industry's increase of 10.58%. Also, the company saw its 2017 and 2018 estimates moving north by nearly 2.6% and 1.5% respectively, over the last 60 days. We expect the stock to retain this momentum, courtesy a few positives.
Principal Financial has been witnessing the operating earnings growth over a considerable period of time. This is primarily owing to a better-than-expected performance across most of the company's lines and segments.
Going ahead, the financial group is expected to deliver a strong investment performance, expand its solution set and strengthen relationships with customers and distributors.
Good news is that the company's improving Asset Under Management (AUM), strong sales and client retention have poised it well for solid earnings growth in 2017.
Interestingly, Principal Financial expects to display AUM growth in the near term, fueled by the company's extensive distribution footprint, best-in-class solutions and an operational discipline.
The Zacks Rank #2 (Buy) investment manager envisions an astronomical $1 trillion in assets under management in five to seven years on the strength of various growth drivers and leadership position.
Further, the company has projected revenue growth for Retirement and Investor Services, Principal International and Principal Global Investors businesses in 2017.
Principal Financial has been effectively deploying capital to enhance the shareholders' value. The company expects a capital deployment between $800 million and $1 billion in 2017 (in quarterly dividends, strategic acquisitions and share buybacks).
Over the long term, Principal Financial is likely to spend 65-70% of net income on such activities.
With respect to share buybacks, on May 17, 2017, the board of directors of Principal Financial authorized a share buyback program to return more value to the investors. The latest authorization would therefore allow the company to spend up to $250 million to repurchase the common stock. With this new authorization, the company now has $350 million left under the buyback program.
We believe, Principal Financial will continue to build a momentum in 2017 and this continued pace is anticipated to translate into long-term value for the shareholders.
Stocks to Consider
Investors interested in other stocks from the finance sector might consider Assurant, Inc. AIZ , Cigna Corporation CI and Old Republic International Corporation ORI . Each stock carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Assurant offers risk management solutions for housing and lifestyle markets worldwide. The company delivered positive surprises in three of the last four quarters with an average beat of 6.82%.
Cigna provides insurance and related products plus services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 1.35%.
Old Republic deals in insurance underwriting and related services business, primarily in the U.S. and Canada. The company delivered positive surprises in two of the last four quarters with an average beat of 12.71%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.