Credit Suisse Upgrades Principal Financial Group (PFG) to Outperform with Street High PT on 'Shifts to Capital Light, Higher Growth Fee Businesses'
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Credit Suisse analyst Andrew Kligerman upgraded Principal Financial Group (NASDAQ: PFG) from Neutral to Outperform with a price target of $82.00 (from $57.00).
The analyst comments "Strong core business growth. PFG guided to 9-12% EPS CAGR from 2020-2023, including 8-10% intermediate-term earnings growth for RIS-Fee, via synergies in its IRT acquisition and small/mid business (SMB) proprietary asset sales gains; and a 10-12% growth outlook for Principal Global Investors, led by higher-margin private and specialty asset class products. Principal International’s 9-11% growth outlook is supported by ongoing pension reform in countries where PFG has leading market positions. Specialty Benefits’ 7-9% growth outlook will be driven by underpenetrated SMB and business owner markets. Divesting low multiple spread and risk businesses at higher multiples. Recent annuity block deals (sold at low double-digit multiples, well above mid single-digit public multiples) suggest a supportive market for RIS-Spread divestiture. We estimate PFG can free $1.5-1.6B of capital from its $18B of fixed annuity reserves. An Individual Life divestiture of universal life with secondary guarantees (ULSG) would reduce interest rate exposure, though it would likely free limited capital, but PFG may also sell other blocks of retail life insurance at higher multiples (VOYA’s recent Life divestiture transacted at ~9x TTM earnings)."
Shares of Principal Financial Group closed at $63.54 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst PT Change, Hot Comments, Hot Upgrades, Upgrades
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