Morgan Stanley Lowers Price Target On Principal Financial Group On Reasons For Concern

In a report published Friday, Morgan Stanley analyst Nigel Dally reiterated an Equal-Weight rating on Principal Financial Group PFG, but lowered the price target from $55.00 to $52.00. In the report, Morgan Stanley noted, “Over the past several years, Principal has delivered generally strong earnings growth reflecting solid growth in AUM and margin expansion. Against this, we considered the fourth quarter results to be disappointing. Accumulation margins fell sharply, running 300 basis points below our expectations, and eroding our confidence that the strong gains the company made earlier in 2014 will be sustainable in 2015. Flows were similarly a mixed bag, with continued outflows in pension and PGI but inflows elsewhere. Further, results would have been worse had it not been for what we considered an abnormally low tax rate. Given the weakness in results, we are cutting our future estimates, which coupled with lower peer multiples, is leading us to reduce our price target $3 to $52. As this suggests limited upside from where the stock is currently trading, we are reiterating our Equal-weight rating on the stock.” Principal Financial Group closed on Thursday at $48.08.