Principal Financial Group’s SWOT analysis: stock outlook amid leadership changes

Principal Financial Group, Inc. (NASDAQ:PFG), a global financial investment management and insurance company with a market capitalization of $17.3 billion, has been navigating a complex market environment characterized by leadership changes, strategic initiatives, and varying analyst perspectives. According to InvestingPro, the company maintains a "GOOD" overall financial health score of 2.51 out of 5, demonstrating particular strength in relative value and cash flow management. This comprehensive analysis examines PFG’s recent performance, strategic direction, and market position to provide investors with a clear understanding of the company’s current state and future prospects.

Financial Performance and Market Position

PFG reported mixed results in its recent financial performance, maintaining profitability with earnings per share of $4.68 over the last twelve months. The company’s Q3 2024 core earnings per share (EPS) aligned with expectations, excluding an unexpected charge of $0.29 per share from an actuarial review. Notably, PFG has demonstrated strong commitment to shareholder returns, having maintained dividend payments for 24 consecutive years and raised dividends for 16 straight years, with a current yield of ~4%.

Want deeper insights into PFG’s financial health and growth potential? InvestingPro subscribers have access to over 30 additional financial metrics and exclusive ProTips. This charge raised questions about the predictability of future earnings. However, PFG demonstrated strength in certain areas, particularly in Pension Risk Transfer (PRT) sales, which continued to show robust performance.

The company’s Commercial Real Estate (CRE) portfolio remained stable, with no additional maturities expected for the remainder of 2024. This stability provides some reassurance to investors concerned about potential risks in the real estate sector. Additionally, PFG increased its quarterly dividend, signaling confidence in its financial stability and commitment to shareholder returns.

Despite these positive indicators, PFG faced challenges in other areas. The company experienced net outflows, particularly in fee-focused businesses within Retirement and Income Solutions (RIS) and Principal Asset Management. While the rate of outflows has decreased, this trend remains a concern for some analysts. The benefits and protection distribution segment also saw a decline of approximately 15% year-over-year in Q4 2024.

Strategic Initiatives and Leadership Changes

PFG has been implementing strategic initiatives to drive growth and improve its market position, with management actively supporting shareholder value through aggressive share buybacks. A key focus has been on capturing more revenue from retirement customers, which aligns with the company’s strengths in retirement solutions and asset management. The strategy appears to be working, with revenue growing by 5.8% over the last twelve months to $15.8 billion. This strategy could potentially offset some of the challenges faced in other business segments.

In a significant leadership change, Joel Pitz was appointed as executive vice president and Chief Financial Officer (CFO) in May 2025. Pitz, who had been serving as interim CFO since August 2024, brings valuable experience as a controller and CFO for international businesses. This appointment is viewed by some analysts as an incremental positive for the company, potentially bringing fresh perspectives to PFG’s financial strategies.

Outlook and Guidance

PFG has maintained its financial objectives, including targets for return on equity (ROE), EPS growth, and cash flow conversion. The company’s current return on equity stands at 10%, while its robust cash flow generation has resulted in a significant free cash flow yield of 29%. Based on InvestingPro’s Fair Value analysis, PFG currently appears to be trading near its fair value, with analysts setting price targets ranging from $69 to $99. The company’s outlook for 2025 aligns with its long-term EPS growth guidance of 9% - 12%, suggesting an EPS range of $8.34 - $8.57. This outlook has led some analysts to anticipate a rise in consensus EPS estimates.

Analysts have provided varying EPS estimates for the coming years. For 2025, estimates range from $8.02 to $8.57, while 2026 estimates fall between $8.83 and $9.34. These projections reflect expectations of continued growth, albeit with some variations in the pace of that growth.

The Variable Investment Income (VII) has been a factor in PFG’s performance, with improvements in real estate performance contributing positively. However, some analysts project weaker VII for 2025, which could partially offset gains from equity market recoveries.

Bear Case

How might persistent net outflows affect PFG’s long-term growth?

Persistent net outflows, particularly in fee-focused businesses, could pose challenges to PFG’s long-term growth prospects. These outflows may impact assets under management (AUM) and, consequently, fee-based revenue. If this trend continues, it could pressure PFG’s ability to meet its growth targets and maintain market share in competitive segments such as asset management and retirement solutions.

Moreover, ongoing outflows might signal underlying issues with product attractiveness or customer retention strategies. This could necessitate increased investment in product development or marketing efforts, potentially impacting profit margins. The company may need to address these outflows through enhanced product offerings, improved customer service, or more competitive pricing to reverse the trend and support sustainable growth.

What risks does PFG face in its Commercial Real Estate portfolio?

While PFG’s Commercial Real Estate portfolio has shown stability, with no additional maturities expected for the remainder of 2024, potential risks still exist in this sector. The commercial real estate market can be sensitive to economic cycles, interest rate changes, and shifts in work patterns, such as the increased adoption of remote work.

A downturn in the commercial real estate market could lead to increased defaults or reduced property values, potentially impacting PFG’s investment income and balance sheet strength. Additionally, any concentration in specific geographic areas or property types could expose the company to localized risks or sector-specific challenges.

PFG must continue to monitor and manage its CRE portfolio carefully, maintaining diversification and conducting regular risk assessments to mitigate potential negative impacts on its financial performance.

Bull Case

How could PFG’s focus on retirement customers drive future revenue growth?

PFG’s strategic focus on capturing more revenue from retirement customers presents a significant opportunity for future growth. The retirement market is expanding as the global population ages, creating increased demand for retirement planning, income solutions, and asset management services.

By leveraging its existing strengths in retirement solutions and asset management, PFG could develop tailored products and services that meet the evolving needs of retirement customers. This could include innovative income-generating products, comprehensive retirement planning tools, or specialized investment strategies for retirees.

Furthermore, this focus aligns with broader market trends towards personalized financial services and holistic wealth management. If executed effectively, this strategy could lead to increased customer acquisition, higher retention rates, and growth in assets under management, ultimately driving revenue and profitability.

What impact might the new CFO have on PFG’s financial strategies?

The appointment of Joel Pitz as CFO could have a positive impact on PFG’s financial strategies. Pitz’s experience as a controller and CFO for international businesses brings valuable expertise to the role, potentially enhancing PFG’s global financial operations and strategic planning.

A new CFO often brings fresh perspectives and can catalyze changes in financial management approaches. Pitz may introduce new efficiency measures, capital allocation strategies, or risk management techniques that could improve PFG’s financial performance and stability.

Additionally, his international experience could be particularly beneficial as PFG navigates global market challenges and seeks growth opportunities abroad. This could lead to more effective management of currency risks, improved international investment strategies, and potentially expanded global operations.

SWOT Analysis

Strengths:

• Strong performance in Pension Risk Transfer sales
• Stable Commercial Real Estate portfolio
• Increased quarterly dividend, indicating financial stability
• Expertise in retirement solutions and asset management

Weaknesses:

• Net outflows in fee businesses, particularly in RIS and Principal Asset Management
• Underperformance in international pension and life insurance segments
• Unexpected charges from actuarial reviews impacting earnings predictability

Opportunities:

• Strategic focus on capturing more retirement customer revenue
• Potential for improved Variable Investment Income as real estate performance recovers
• Expansion of tailored products and services for the growing retirement market
• Leveraging new CFO’s international experience for global growth initiatives

Threats:

• Market volatility affecting Assets Under Management and investment income
• Competitive pressures in the financial services industry
• Potential economic downturns impacting Commercial Real Estate investments
• Regulatory changes affecting retirement products and services

Analysts Targets

• Piper Sandler: $88.00 (May 21st, 2025)
• BMO Capital Markets: $73.00 (April 29th, 2025)
• Piper Sandler: $90.00 (February 7th, 2025)
• Barclays (LON:BARC): $80.00 (February 7th, 2025)
• Barclays: $77.00 (January 17th, 2025)
• RBC Capital Markets: $91.00 (November 19th, 2024)

This analysis is based on information available up to May 25, 2025.

Discover PFG’s complete financial story with InvestingPro, offering comprehensive Pro Research Reports that transform complex Wall Street data into clear, actionable intelligence. As one of 1,400+ US equities covered, PFG’s detailed report includes exclusive metrics, Fair Value estimates, and expert analysis to help you make smarter investment decisions.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on PFG. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore PFG’s full potential at InvestingPro.

Should you invest in PFG right now? Consider this first:

Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if PFG is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.

To evaluate PFG further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if PFG appears on our undervalued or overvalued stock lists.

These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.