Morgan Stanley Sees Principal Financial Group Shares Falling Soon

Morgan Stanley believes the share price of Principal Financial Group PFG will fall in absolute terms over the next 60 days. This is because the stock has traded up recently, making short term valuation much less compelling. Given the rebound in the valuation, with the stock currently trading at 8.7 times 2011 estimated earnings, the valuation is less compelling to other equity sensitive names such as Hartford HIG, where Morgan Stanley is issuing a positive RTI. Morgan Stanley is encouraged by positive commentary from management regarding sales prospects, this seems more than adequately reflected in valuation of the stock relative to its peers. Headwinds are still seen for the back half of the year in terms of seasonality in health insurance, lower average level of equity markets versus the first half of the year, lost income related to its new Brazilian joint venture, low interest rates, and run-off of its institutional business. PFG is trading 1% lower on the day at $25.45