Principal Financial Eyes Growth Despite Low Interest Rates

On Sep 13, 2016, we issued an updated research report on Principal Financial Group Inc. (NYSE:PFG) .

Principal Financial’s business across most lines and segments continue to deliver solid results. This has helped the investment manager to generate solid operating earnings. Moreover, the company’s annuity and insurance business have been supporting sustained earnings growth.

In addition, the company’s inorganic story remains impressive with buyouts strengthening its international footprint.

Further, the investment manager’s Asset Under Management (AUM) has been increasing. The upside is driven by better results at three asset management and asset accumulation segments. AUM growth is expected to be supported by the company’s extensive distribution footprint, best-in-class solutions and operational discipline. Principal Financial envisions $1 trillion in AUM in five to seven years on the back of various growth drivers and its leadership position in the industry.

Furthermore, Principal Financial’s capital deployment through share buybacks and dividend payment looks impressive, making it an attractive pick for yield-seeking investors. We expect that the company’s increased focus on fee-based revenues will enable it to return more value to shareholders.

Notably, Principal Financial anticipates capital deployment of about $0.8–$1 billion in 2016 through quarterly dividends, strategic acquisitions and share buybacks.

However, exposure to a low interest rate environment, has been weighing upon the company’s investment results. Given the prevalent low interest rate environment, the company does not expect a turnaround any time soon.

Also, escalating expenses remain a headwind for the company.

Zacks Rank and Stocks to Consider

Currently, Principal Financial holds a Zacks Rank #2 (Buy). Investors interested in other stocks can consider Apollo Global Management, LLC (NYSE:APO) , Virtus Investment Partners, Inc. (NASDAQ:VRTS) and Eaton Vance Corp. (NYSE:EV) . While both Apollo Global Management and Virtus Investment Partners sport a Zacks Rank #1 (Strong Buy), Eaton Vance holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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