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Principal Financial (PFG)
:PFG
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Principal Financial
(NASDAQ:PFG)
63Neutral
Positive Factors
Business Mix Transformation
PFG has executed on a business mix transformation and has a solid cash flow profile supported by its more capital-light mix and focus on the less competitive small and midsize market (SMB) marketplace.
Free Cash Flow
PFG divested more capital intensive retail fixed annuities and life insurance business lines to focus on employer-centric offerings, resulting in a free cash flow profile that ranks as above-average for conversion rate and growth outlooks.
Revenue Growth Potential
The combination of PFG's SMB focus, exposure to the Retirement ecosystem, and Global Asset Management capabilities should generate 4-7% revenue growth vs 1-4% industry growth.
Negative Factors
Earnings Impact
PFG's international pension business earnings have been impacted by a stronger U.S. dollar over the past decade.
Investment Outflows
Investment Management saw $4.2bn in net outflows in the quarter due to a couple large accounts exiting the fund complex.
Secular Challenges
PFG faces some secular challenges including declining fee rates in its retirement and asset management markets as well as macro sensitivities including elevated equity market sensitivity and FX impacts to earnings within its international pension operations.
Principal Financial (PFG) vs. S&P 500 (SPY)
Market Cap
$16.53B
Dividend Yield3.96%
Average Volume (3M)1.66M
Price to Earnings (P/E)15.7
Beta (1Y)0.95
Revenue Growth-18.19%
EPS GrowthN/A
CountryUS
Employees19,700
SectorFinancial
Sector Strength84
IndustryInsurance - Diversified
Share Statistics
EPS (TTM)4.67
Shares Outstanding224,971,710
10 Day Avg. Volume1,992,198
30 Day Avg. Volume1,655,547
Financial Highlights & Ratios
PEG Ratio0.07
Price to Book (P/B)N/A
Price to Sales (P/S)1.02
Price to Cash Flow (P/CF)3.20
P/FCF Ratio3.65
Enterprise Value/Market Cap1.37
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit1.40
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$82.27Price Target Upside11.99% Upside
Rating ConsensusHold
Number of Analyst Covering11
Principal Financial Business Overview & Revenue Model
Company DescriptionPrincipal Financial Group, Inc. provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide. The company operates through Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments. The Retirement and Income Solutions segment provides a portfolio of asset accumulation products and services for retirement savings and income. It offers products and services for defined contribution plans, including 401(k) and 403(b) plans, defined benefit pension plans, nonqualified executive benefit plans, employee stock ownership plans, equity compensation, and pension risk transfer services; individual retirement accounts; investment only products; and mutual funds, individual variable annuities, and bank products. The Principal Global Investors segment provides equity, fixed income, real estate, and other alternative investments, as well as asset allocation, stable value management, and other structured investment strategies. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities, and life insurance accumulation products, as well as voluntary savings plans in Brazil, Chile, Mexico, China, Hong Kong Special Administrative Region, India, and Southeast Asia. The U.S. Insurance Solutions segment provides specialty benefits, such as group dental and vision insurance, group life insurance, and group and individual disability insurance, as well as administers group dental, disability, and vision benefits; and individual life insurance products comprising universal, variable universal, indexed universal, and term life insurance products in the United States. It also offers insurance solutions for small and medium-sized businesses and their owners, as well as executives. Principal Financial Group, Inc. was founded in 1879 and is based in Des Moines, Iowa.
How the Company Makes MoneyPrincipal Financial Group generates revenue through several key streams. Primarily, the company earns money from managing retirement and investment products, including mutual funds and annuities, where they charge management fees based on the assets under management (AUM). Additionally, PFG receives premiums from its insurance products, which include life and disability insurance. The company also earns fees from its asset management services provided to institutional clients. Significant partnerships with financial advisors and other financial institutions enhance the distribution and reach of Principal's products and services, contributing to its earnings. The company's diversified approach across different financial sectors helps in mitigating risks and capitalizing on various market opportunities.
Principal Financial Financial Statement Overview
Summary
Principal Financial demonstrates strong profitability improvements with enhanced margins and return on equity. However, inconsistent revenue growth and cash flow challenges, particularly the recent negative free cash flow, pose risks. The balance sheet reflects moderate leverage, which is manageable but needs monitoring given the asset-intensive nature of the industry.Income Statement
Principal Financial has shown significant improvement in profitability over the years with a notable increase in EBIT and Net Income. The net profit margin improved from 4.56% in 2021 to 9.74% in 2024, reflecting better cost management. However, revenue growth has been inconsistent, with a decline in 2024 after a peak in 2022. The EBIT margin has strengthened, showing operational efficiency improvements.72
Positive
Balance Sheet
The company maintains a stable equity base, with a debt-to-equity ratio of 0.37 in 2024, indicating moderate leverage. The equity ratio remains relatively low at 3.53%, reflecting the asset-heavy nature of the industry. Return on equity has improved to 14.17% in 2024, showcasing effective use of shareholders' funds despite the low equity ratio.65
Positive
Cash Flow
Cash flow performance is mixed, with negative free cash flow in 2024 due to a significant drop in operating cash flow. The operating cash flow to net income ratio has been volatile, currently negative, indicating challenges in converting net income into cash. The free cash flow to net income ratio also turned negative, highlighting potential liquidity concerns.55
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 16.13B | 13.67B | 17.49B | 14.26B | 14.74B | Gross Profit |
| 16.13B | 13.67B | 17.49B | 14.26B | 14.74B | EBIT |
| 0.00 | 8.59B | 6.02B | 2.04B | 1.66B | EBITDA |
| 0.00 | 0.00 | 6.28B | 0.00 | 0.00 | Net Income Common Stockholders |
| 1.57B | 623.20M | 4.76B | 1.58B | 1.40B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 29.94B | 27.19B | 67.74B | 80.49B | 81.56B | Total Assets |
| 313.66B | 305.05B | 303.00B | 321.21B | 313.47B | Total Debt |
| 4.11B | 3.99B | 4.08B | 4.36B | 4.36B | Net Debt |
| -103.90M | -715.70M | -770.30M | 2.03B | 1.51B | Total Liabilities |
| 302.19B | 293.84B | 292.70B | 304.70B | 296.60B | Stockholders Equity |
| 11.09B | 10.92B | 10.00B | 16.13B | 16.56B |
| Cash Flow | Free Cash Flow | |||
| 4.53B | 3.69B | 3.06B | 3.09B | 3.63B | Operating Cash Flow |
| 4.60B | 3.79B | 3.17B | 3.22B | 3.74B | Investing Cash Flow |
| -5.40B | -1.35B | 1.06B | -5.66B | -5.03B | Financing Cash Flow |
| 300.30M | -2.59B | -1.72B | 1.92B | 1.62B |
Principal Financial Technical Analysis
Negative
73.46
Price Trends
81.02
Negative
80.43
Negative
80.99
Negative
Market Momentum
-2.43
Negative
43.49
Neutral
68.98
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFG, the sentiment is Negative. The current price of 73.46 is below the 20-day moving average (MA) of 75.50, below the 50-day MA of 81.02, and below the 200-day MA of 80.99, indicating a bearish trend. The MACD of -2.43 indicates Negative momentum. The RSI at 43.49 is Neutral, neither overbought nor oversold. The STOCH value of 68.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PFG.
Principal Financial Risk Analysis
Principal Financial disclosed 56 risk factors in its most recent earnings report. Principal Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Principal Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
83 Outperform | $33.74B | 11.52 | 18.49% | 1.67% | 7.55% | 14.16% | |
82 Outperform | $34.07B | 8.10 | 22.02% | ― | 26.24% | -3.87% | |
68 Neutral | $47.41B | 16.04 | 7.10% | 1.97% | -28.56% | 1.14% | |
64 Neutral | $15.24B | 13.15 | 61.74% | 1.93% | 16.81% | 14.00% | |
63 Neutral | $16.53B | 15.75 | 9.70% | 3.96% | -18.19% | ― | |
63 Neutral | $10.08B | 14.21 | 9.36% | 4.60% | -5.03% | ― | |
63 Neutral | $12.31B | 9.55 | 7.88% | 79.24% | 12.71% | -4.71% |
* Financial Sector Average
Performance Comparison
PFG
Principal Financial
73.46
-4.19
-5.40%
AEG
Aegon
6.45
0.50
8.40%
AIG
American International Group
81.22
7.07
9.53%
ACGL
Arch Capital Group
90.68
3.91
4.51%
HIG
Hartford Financial
118.76
23.35
24.47%
EQH
Equitable Holdings
49.68
13.02
35.52%
Principal Financial Earnings Call Summary
Earnings Call Date:Apr 24, 2025
(Q1-2025)
| % Change Since: -2.05%|
Next Earnings Date:Jul 24, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While the company demonstrated strong EPS growth, increased AUM, and robust performance in retirement and pension risk transfer segments, it faced challenges with negative net cash flow, market volatility, and lower dental sales impacting overall growth. The sentiment of the call is balanced between positive achievements and significant challenges.Q1-2025 Updates
Positive Updates
EPS Growth
First quarter adjusted non-GAAP earnings excluding significant variances was $439 million or $1.92 per diluted share, a 10% increase in EPS over the first quarter of 2024.
Capital Return to Shareholders
Returned $370 million of capital to shareholders in the first quarter, including $200 million of share repurchases and an increase in common stock dividend.
AUM Increase
Total company managed AUM increased to $718 billion at the end of the quarter, reflecting positive market performance and the beneficial impact of exchange rates.
Retirement Segment Performance
Generated positive account value net cash flow of $400 million and strong activity in small and mid-sized market with $1.3 billion of positive flows.
Pension Risk Transfer Growth
Pension risk transfer volume grew year over year, reaching $800 million in the quarter.
Negative Updates
Negative Net Cash Flow
Net cash flow was negative $4 billion in the quarter, driven by two low-fee institutional fixed income withdrawals in investment management.
Market Volatility Impact
Market volatility has been extreme, impacting fee revenue in retirement and asset management, with expectations for continued difficulty in upcoming quarters.
Lower Dental Sales in Specialty Benefits
Overall growth impacted by lower dental sales due to disciplined pricing actions and absence of new PFML markets.
Investment Management Seasonal Expenses
Investment management had $35 million of higher deferred compensation and payroll taxes compared to the fourth quarter.
Company Guidance
During the Principal Financial Group's First Quarter 2025 Earnings Conference Call, the company reported a 10% increase in adjusted non-GAAP earnings per share (EPS), amounting to $1.92 per diluted share, compared to the first quarter of 2024. They returned $370 million of capital to shareholders, including $200 million in share repurchases. Total company managed assets under management (AUM) increased to $718 billion, despite a net cash outflow of $4 billion due to two low-fee institutional fixed income withdrawals. The company highlighted strong performance in private real estate, preferred, and stable value asset classes, as well as $700 million in local investment management flows in Mexico and Southeast Asia. They also noted positive momentum in their retirement ecosystem, with $400 million in positive account value net cash flow and $1.3 billion of positive flows in the small and mid-sized market. The pension risk transfer volume reached $800 million, maintaining their position among the top four providers. Specialty benefits saw strong underwriting results, though growth was impacted by the absence of new paid family and medical leave markets and lower dental sales. The company's capital strategy remains robust, with $1.8 billion in excess and available capital, and they continue to focus on disciplined expense management and strategic growth across their business segments.Principal Financial Corporate Events
Financial Disclosures
Principal Financial Reports Strong AUM Growth in March
Positive
Apr 17, 2025
As of March 31, 2025, Principal Financial Group reported assets under management totaling $717.9 billion, with $555.8 billion managed by Principal Asset Management – Investment Management and $133.5 billion by Principal Asset Management – International Pension. The company experienced a 1.4% positive impact on AUM due to foreign currency translation and market performance, highlighting its strategic allocations during market dislocations.
Spark’s Take on PFG Stock
According to Spark, TipRanks’ AI Analyst, PFG is a Neutral.
Principal Financial’s score of 66 reflects strong profitability improvements and strategic successes in expanding its retirement ecosystem. Despite inconsistent revenue growth and cash flow challenges, the company maintains moderate leverage and a reasonable valuation with a solid dividend yield. The positive earnings call sentiment further supports the stock, although technical indicators suggest some short-term uncertainty.
To see Spark’s full report on PFG stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.