Will Loews Corporation (L) Earnings Meet Expectations?


Loews Corporation (NYSE:L) has been inconsistent of late in delivering earnings in line with the expectations. For instance, in the last four quarters, the company’s earnings failed to meet the analysts’ expectations in three quarters. The negative surprise ranged between 1.5% and 8.0%. In the other quarter, its earnings exceeded 32% of the analysts’ expectations.

Key Points

Loews Corporation (NYSE:L) operate four main divisions, CNA a Property & Casual Insurer, Diamond Offshore, in Offshore drilling, Boardwalk Pipeline Partners in Natural Gas & midstream MLP, and Loews Hotels and Resorts. This apart, the company also gets money from investment income, as well as, others. Its main segment is CNA Financial, which generates about 67.3% of its total revenue. In the first quarter, its revenue dipped 3.3%. However, its income from the segment grew 17.4% in the same quarter. Its performance will assume greater importance to dictate the directions of its results in the second quarter.

The next big division is Diamond Offshore, which contributes about 18% revenue to the overall revenue. The division also witnessed 11.7% fall in revenue. That dragged to loss before income tax in the first quarter. Similarly, the other segment, Boardwalk Pipeline, also recorded a fall in revenue in the first quarter. Its contributions also fell to 9.5% from 9.7%. However, the division’s income before tax more than tripled in the March quarter. It remains to be seen whether Loews Corporation (NYSE:L) will be able to reverse the trend in the June quarter, especially its financial segment.

The company’s book value per value went from $51.70 at year end to $51.98 at the end of the 1st quarter. The company had over $5.4 billion in parent company cash and investments and had lowered its shares outstanding to 371 million shares at the end of Q1. The company maintains ample liquidity to take advantage of market opportunities.

Growth In One Division

The only division that the company was able to record growth was in Loews Hotels. Though the division recorded 32.4% growth in the first quarter, its revenue represented only 4% compared to 2.8% in the year-ago quarter. Its income before tax also doubled. Therefore, the company is hoping that the division will repeat its performance in the June quarter too.

Analysts expect Loews Corporation (NYSE:L) to earn 70 cents a share in the second quarter. However, much depends on how its financial division performs. There was nothing unfavorable in the sector in the second quarter. That is only weighing in its favor. Loews Corporation (NYSE: L) will report second quarter 2015 financial results on Monday, August 3, 2015.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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