Goldman Sachs analyst Alex Scott upgraded Voya Financial Inc. to "buy" and downgraded Principal Financial Group Inc. to "neutral."
Scott expects Voya to still hit its target of 10%-plus EPS growth despite the pullback in equity markets. He believes that the expense initiatives of the company will lead to more flexible expenses compared to peers in response to the decline in assets under management, resulting in "more durable" margins. He also sees potential upside to capital return and improving organic growth for the company.
He cut his Voya EPS estimate to $3.97 from $4 for 2018 and raised his EPS projections to $5.51 from $5.47 for 2019 and to $6.35 from $6.21 for 2020.
Scott said he sees less upside for Principal Financial because of increased pressure on the company's international business, lower expense flexibility, the potential for lower margins in group benefits and a slower turnaround for organic growth in Principal Global Investors as high-yield continues to feel pressure on net flows.
Scott decreased his Principal Financial EPS estimates to $5.68 from $5.80 for 2018, to $5.52 from $5.81 for 2019 and to $6.06 from $6.32 for 2020.