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Will Principal Financial's (PFG) Q3 Earnings Disappoint?

Principal Financial Group Inc.PFG is set to report third-quarter 2015 earnings results on Oct 22, 2015. Last quarter, it posted a positive earnings surprise of 4.81%. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Last quarter, Principal Financial undertook a few initiatives that should have a positive impact on earnings. The company's already strong inorganic growth profile was boosted further by the acquisition of AXA Group's AXAHY Mandatory Provident Fund (MPF) and Occupational Retirement Schemes Ordinance (ORSO) pension businesses in Hong Kong, in Sep 2015. The deal has fortified Principal Financial's position in the retirement and long-term savings market and is thus, expected to be accretive to earnings.

Additionally, the introduction of first exchange-traded fund (ETF) on the NYSE Arca is expected to help investors make more income, in turn bolstering top line and hence, impacting the earnings of the company positively.

However, increased expenses and high financial leverage are negatives that are likely to mar the above-mentioned positives of Principal Financial. Moreover, a soft interest rate environment continues to weigh on investment results and investment yield, which dampens the top line and is thus a threat to earnings.

Earnings Whispers

Our proven model does not conclusively show that Principal Financial is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Principal Financial has an ESP of -0.93%. This is because the Most Accurate estimate stands at $1.06 and the Zacks Consensus Estimate is pegged at $1.07 per share.

Zacks Rank: Principal Financial has a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are two stocks from the finance sector which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Arch Capital Group Ltd. ACGL has an Earnings ESP of +4.26% and a Zacks Rank #2 (Buy). The company is scheduled to release third-quarter earnings on Oct 28.

Assurant, Inc. AIZ has an Earnings ESP of +5.30% and a Zacks Rank #3 (Hold). The company is scheduled to release third-quarter earnings on Oct 27.

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ASSURANT INC (AIZ): Free Stock Analysis Report

PRINCIPAL FINL (PFG): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

AXA SA -SP ADR (AXAHY): Free Stock Analysis Report

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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