Why Is Loews (L) Down 3.8% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Loews Corporation L. Shares have lost about 3.8% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is L due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Loews (L) Q1 Earnings Beat, Rise Y/Y on Lower Share Count
Loews reported first-quarter 2018 operating earnings of 89 cents per share, beating the Zacks Consensus Estimate of 87 cents. The bottom line also improved 2.3% year over year.
The company witnessed lower earnings at Diamond Offshore and Boardwalk Pipeline Partners plus lower parent company net investment income. However, higher earnings at CNA Financial and Loews Hotels offset this downside. Also, share buybacks leading to lower share count fueled a year-over-year improvement.
Behind the Headlines
Operating revenues of $3.6 billion increased 9.4% year over year. Rise in insurance premiums and other revenues aided this improvement.
Total expenses increased 13.8% year over year to $3.2 billion, mainly due to higher contract drilling expenses and other operating costs.
Book value as of Mar 31, 2018 was $57.48 per share, down 0.6% from $57.83 as of Dec 31, 2017.
Segment Details
CNA Financial’s revenues rose nearly 8.8% from the prior-year quarter to $2.5 billion. Its reported net income attributable to Loews Corp. is $261 million, reflecting an increase of 11.5% from the year-ago quarter owing to the favorable impact of the Tax Cuts and Jobs Act and improved P&C underwriting results. However, decline in limited partnership investment results, higher adverse reserve development under the 2010 asbestos and environmental pollution loss portfolio transfer as well as lower realized investment results partially offset the upside.
Boardwalk Pipeline’s revenues decreased 8.4% year over year to $337 million. Net income attributable to Loews Corp., dipped 2.7% to $36 million, attributable to revenue impact stemming from the restructuring of a transportation contract in 2017, lower storage and parking plus lending revenues.
Loews Hotels’ revenues improved 9.6 % year over year to $183 million. Income owing to Loews Corp. surged 30% to $13 million, driven by an improved operating performance at joint venture properties.
Diamond Offshore’s revenues fell 20.7% year over year to $299 million. Net income attributable to Loews Corp. was $10 million, down 16.8% year over year. This drop was due to persistent depressed market conditions, partially offset by a lower depreciation expense resulting mainly from asset impairment charges incurred in prior years.
Share Repurchase Update
The company bought back 9.9 million shares worth $497 million in the first quarter. Subsequently, through Apr 27, 2018, the company repurchased another 4 million shares for $207 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
Loews Corporation Price and Consensus
Loews Corporation Price and Consensus | Loews Corporation Quote
VGM Scores
At this time, L has an average Growth Score of C. Its Momentum is doing a bit better with a B. The stock was also allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is equally suitable for value and momentum investors while growth investors may want to look elsewhere.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, L has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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