Principal Financial Group, Inc . PFG is set to report fourth-quarter 2016 results on Jan 30, after the market closes . Last quarter, the company posted a positive earnings surprise of 2.68%. Let's see how things are shaping up for this announcement.
Factors to be Considered this Past Quarter
Strong performances at asset management and asset accumulation segments are likely have increased asset under management. The company's fee-based model is expected to have boosted revenues and in turn, the bottom line. This apart, solid sales and retention are likely to have driven premiums higher.
For 2016, Principal Financial estimates net revenue growth in the range of 2-4% at Retirement and Income Solutions-Fees and 8-10% at Retirement and Income Solutions-Spread. Net revenue is estimated to increase in the range of 8-10% at Principal Global Investors. Principal International is expected to report net revenue growth between 8% and 10% in 2016.
The company is likely to have deployed capital between $800 million and $1 billion in 2016 for share buybacks. A lower share count should result in bottom-line growth.
However, investment income is likely to have remained low. Though the Fed raised interest rate on Dec 15, 2016, it was only 16 days before the year ended and the benefit of higher rates could be realized. Hence, this is unlikely to have a substantial impact on the quarterly results.
Also, management expects strengthening of the U.S. dollar to limit the desired revenue growth.
With respect to the surprise trend, Principal Financial delivered positive surprises in two out of the last four quarters, with an average beat of 1.57%. The stock price has been fluctuating over the last few days. We wait to see how the stock fares post fourth-quarter earnings release.
Principal Financial Group Inc Price and EPS Surprise
Our proven model does not conclusively show that Principal Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP : Principal Financial has an Earnings ESP of -1.74%. This is because the Most Accurate estimate stands at $1.13 while the Zacks Consensus Estimate is pegged higher at $1.15. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank : Principal Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, a neagtive Earnings ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the investment management industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter.
Affiliated Managers Group, Inc. AMG , which is slated to report fourth-quarter earnings on Feb 7, has an Earnings ESP of +0.81% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .
Apollo Global Management, LLC APO has an Earnings ESP of +6.94% and a Zacks Rank #2. The company is set to report fourth-quarter earnings on Feb 3.
Eaton Vance Corp. EV has an Earnings ESP of +1.72% and a Zacks Rank #2. The company is likely to report fourth-quarter earnings on Feb 22.
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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.