Principal Financial Stock Underperforms Market Expectations

Principal Financial faces challenges as Q4 EPS of $1.94 falls short of expectations. Despite a projected 22% EPS growth this fiscal year, its emerging underperformance compared to broader indices raises investor concern.

Date: 25-02-2025

AI Rating: 5

Principal Financial Overview
Founded in 1879, Principal Financial Group, Inc. operates as a pivotal financial services provider with a focus on retirement solutions, asset management, and insurance.

Performance Metrics
Principal Financial has experienced a decline relative to the broader S&P 500 Index, gaining only 5.9% over the past year compared to the index's 20.7%. This lackluster performance is concerning for investors, indicating underperformance in a rising market. However, in 2025, PFG shows more promising results, with a 9% increase versus SPX's 2.2%.

Quarterly Earnings
In the latest quarterly report, PFG's adjusted EPS came in at $1.94, slightly below analyst expectations of $1.95. This shortfall contributes to a perception of underperformance in earnings quality, which can negatively affect stock valuation. Furthermore, the company's revenues from investment management increased by $37.8 million, driven primarily by an 11% lift in management fees, yet offset by lower performance fees.

Future Growth and Ratings
Looking ahead, analysts forecast a 22% growth in EPS for the current fiscal year, which would reflect positively on the company's financial health if achieved. Nevertheless, the company's historical earnings surprise record is poor, having missed consensus estimates in all four recent quarters. Analyst sentiment indicates a “Hold” rating consensus with three “Strong Buy” ratings against nine “Holds” and four “Strong Sells,” underlining mixed views on future performance.

The current mean price target of $86.07 suggests limited upside potential, with a Street-high target indicating a more optimistic 17.3% upside from current levels. This ambiguity creates hesitation among investors regarding the viability of long-term investments in PFG.

Stocks: PFG