Principal Financial Group, Inc. (PFG) has kept its surprise streak alive for eight quarters with its third-quarter 2014 earnings outperformance. Operating net income of $1.19 per share beat the Zacks Consensus Estimate by about 12% and improved nearly 32% year over year.
Increased focus on fee-based businesses drove the top line, and more than offset the increase in expenses thereby propelling earnings.
Shares gained 0.8% in the post market trading session reflecting investor optimism over the solid performance.
Including net realized capital losses of 19 cents, unfavorable adjustment of 20 cents and adjustment for redeemable noncontrolling interest of 3 cents, net income available to common stockholders was a 77 cents per share, down 6% year over year.
Behind the Headlines
Operating revenues in the third quarter increased 10% year over year to $2.6 billion. A 25% rise in premiums and other considerations and a 10% increase in fees and other revenues drove the upside. Revenues outpaced the Zacks Consensus Estimate of $2.5 billion.
Total expense incurred by Principal Financial increased 6% year over year to $2.1 billion. Increase in benefits, claims and settlement expenses commissions and amortization accounted for the expense rise.
Principal Financial’s assets under management as of Sep 30, 2014 were a record $513.5 billion, up 10% year over year.
Book value per share as of at the same date was $33.29, up 12% year over year.
Segment Update
Retirement and Investor Services: Revenues in the quarter improved nearly 16% year over year to $1.3 billion.
Operating earnings increased 18% year over year to $204.3 million.
Principal Global Investors: Revenues from this segment amounted to $173.6 million, 8% higher than the prior-year period, driven by higher management fees due to AUM growth.
Operating earnings increased 10% year over year to $25.3 million on revenue growth and improved margins.
Principal International: Revenues were $407.1 million in the quarter, up 25% year over year on growth in AUM from positive net cash flows.
Operating earnings improved 46% year over year to $73.8 million in the quarter.
US Insurance Solution: Revenues were $821 million, up 7% year over year.
Operating income was $83.3 million, up about 54% year over year.
Corporate: Operating loss widened to $33 million from a loss of $31.5 million recorded in the third quarter of 2013.
Dividend and Share Repurchase Update
The board of directors of Principal Financial approved a quarterly dividend of 34 cents per share. The dividend will be paid on Dec 26 to shareholders of record on Dec 8.
Principal Financial also paid a dividend of 34 cents per share.
With respect to share repurchases, the company spent about $72 million to buy back 1.6 million shares.
Our Take
Increased focus on fee-based revenue sources helped Principal Financial to earn a steady income and return capital to its shareholders through dividends or deploy capital for strategic acquisitions. The company’s diversified business and geographical exposure positions it well to capitalize on opportunities both domestic and global, and fortify its worldwide investment management leadership position.
Principal Financial presently carries a Zacks Rank #3 (Hold).
Results of Other Investment Managers
While The Blackstone Group L.P. (BX) missed the Zacks Consensus Estimate, BlackRock, Inc. (BLK) bettered the same on strong inflows. Yet another investment manager, Janus Capital Group Inc. (JNS) reported in line.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment