A month has gone by since the last earnings report for Loews (L - Free Report) . Shares have lost about 1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Loews due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Loews (L - Free Report) Q2 Earnings Miss, Solid Premiums Aid Revenue Rise
Loews Corporation reported second-quarter 2018 earnings of 72 cents per share, missing the Zacks Consensus Estimate of 73 cents. The bottom line however, increased 4.3% year over year on lower share count.
The company witnessed lower earnings at Diamond Offshore as well as at CNA Financial. However, improved results from the parent company investment portfolio and higher earnings at Boardwalk Pipeline Partners and Loews Hotels limited this downside.
Behind the Headlines
Operating revenues of $3.6 billion increased 8.3% year over year. Rise in insurance premiums and other revenues aided this improvement. Total expenses increased nearly 9% year over year to $3.3 billion, mainly due to higher contract drilling expenses and other operating costs.
Book value as of Jun 30, 2018 was $59.72 per share, up 3.3% from $57.83 as of Dec 31, 2017.
CNA Financial’s revenues rose nearly 8.8% from the prior-year quarter to $2.6 billion. Its reported net income of $240 million is attributable to Loews Corp., reflecting a slip of 1.6% from the year-ago quarter. This downside in turn, is due to lower realized investment results and increased costs associated with the transition to a new IT infrastructure service provider. However, improvement in underwriting income was a partial offset.
Boardwalk Pipeline’s revenues decreased 10.4% year over year to $285 million. Net income on the back of Loews Corp. soared 166.7% to $16 million, owing to lower tax rate and absence of a one-time item. The prior-year quarter suffered loss on the sale of a processing facility. However, lower transportation revenues from contract restructuring and lower transportation rates due to contract expirations were a partial offset.
Loews Hotels’ revenues improved 11% year over year to $201 million. Income owing to Loews Corp. surged 70% to $17 million, driven by improved results at several owned hotels, primarily the Loews Miami Beach Hotel, slightly higher earnings at joint venture properties as well as lower tax incidence.
Diamond Offshore’s revenues plunged 32.1% year over year to $271 million. Net loss attributable to Loews Corp. was $37 million against income of $7 million earned in the year-earlier quarter. This resulted from lower revenues given the continuing depressed market conditions affecting both rig utilization and average daily revenues.
Share Repurchase Update
The company bought back 5.8 million shares worth $290 million in the second quarter. Subsequently, through Jul 27, 2018, the company repurchased another 1 million shares for $49 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Loews has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, Loews has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.