Principal Financial: Stocks retreat to support ahead of earnings (NASDAQ:PFG)

Value, Quality and Dividend were last year’s top performing global styles. One high-dividend stock that is a major holding in a number of dividend-focused US ETFs is Principal Financial Group.

With earnings expected later this month, the price is After seeing a breakout at the end of last year, are there more gains for this insurance stock? And what do valuations look like? Let’s weigh the risks of the name against the possible benefits.

High Dividend Factor: 2022 Winners

According to Bank of America Global Research, Principal (NASDAQ: PFG) operates in four main areas: Retirement & Income Solutions (RIS), Asset Management (PGI), International and US Insurance. RIS provides full-service accumulation, annuity products, annuities, mutual funds, and other services to individuals and small businesses. PGI is a global asset manager. US Insurance offers individual and disability insurance and group life insurance. Finally, the international business sells products in Latin America and Asia.

The Iowa-based insurer with a market capitalization of $20.8 billion is trading at a low 12-month GAAP price-earnings ratio of 4.1 in the financial sector, according to The Wall Street Journal. pays a modest 3.0% dividend yield.

In December, Credit Suisse analysts slashed the stock on valuation, citing limited upside after a massive rally in the second half of the year. Barclays also lowered expectations for PFG after its share price rose after outperforming results in October.

As for valuations, BofA analysts see revenues down about 2% in 2022. Bloomberg’s consensus forecast is less optimistic than BofA’s outlook. Dividends, on the other hand, are expected to increase in proportion to EPS.

Forward valuation multiples are in the low teens, roughly where PFG trades today, but yields should be in the 3-4% range. For financial sector stocks, I like to look at the price-to-book ratio, which is a high 2.2, well above the sector median of 1.2, so that’s not a good sign. Overall, despite strong EPS growth, the stock isn’t overly cheap here.

Key Financials: Earnings, Valuation, Dividend Forecast

The fourth-quarter 2022 earnings date is Monday, Jan. 30, and AMC was confirmed on a conference call later that morning, according to Wall Street Horizon’s corporate events data. You can listen live here. The company’s management team will speak at Credit Suisse’s 24th Annual Financial Services Forum 2023. Such industry conferences often detail important news that can move stock prices.

corporate event calendar

optional angle

A deeper dive into Option Research & Technology Services (ORATS) upcoming earnings report data shows a consensus EPS forecast of $1.52 in its upcoming quarterly report. This represented an 18% decrease from $1.85 in the same period last year. However, on the bullish side, PFG’s history of strong profit margins occurred in October 2020, with the last failure coming in October 2020.

In terms of expected share price volatility, PFG’s implied volatility is relatively low at less than 30%, and its at-the-money straddle, which expires shortly after its fourth quarter report, is priced in at just 3.7% volatility. It became clear. If last time he increased after two earnings reports, I would be a buyer for these cheaper options here.

PFG: A Cheaper Than Earnings Option

technical take

Back in October, I flagged PFG as a breakout candidate and set a price target near $100. rose. After peaking around $96 in November, the stock plummeted quite a bit and he returned to the mid-$80s. I think it could go a little lower as the stock pulls back to retest previous resistance spots.

We would like to buy the stock in the high $80s and stop in the mid $70s. But overall, the way the stock has a bullish uptrend 200-day moving average with significant stock demand, as measured by volume with the price index starting at $80 on the left side of the chart. I like it. All in all, we are approaching a lucrative re-entry into PFG.

PFG: Stocks falling to support

Conclusion

PFG’s valuation is a little steep, but the stock’s momentum and trends suggest it may make sense to buy the stock in the high $80s. Long-term investors may find better value elsewhere in the financial sector.