Will Loews (L) Disappoint This Earnings Season? - Analyst Blog

Loews Corporation L is set to report its first-quarter 2014 results on April 28. Last quarter, the company had posted a 31.4% positive earnings surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Loews' aim to strengthen its hotel business and continued solid underwriting margins from CNA Financial are expected to drive better results at Loews.

CNA Specialty as well as Commercial should benefit from rate increases.

Improving natural gas prices is expected to aid performance at High Mount that suffered over the past quarters due to lower drilling activity and lower natural gas prices.

The ultra-deepwater and deepwater floater markets are gaining momentum, in particular, the ultra-deepwater. However, contracted backlog will restrict Diamond Offshore from capitalizing on strong demand in ultra-deepwater and deepwater markets.

Earnings Whispers?

Our proven model does not conclusively show that Loews is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Positive Zacks ESP:  Loews has a positive Zacks ESP. That is because the Most Accurate estimate stands at 76 cents while the Zacks Consensus Estimate is lower at 75 cents. That leads to a difference of +1.33%.

Zacks Rank #4: Loews's Zacks Rank #4 (Sell), when combined with a positive ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

RenaissanceRe Holdings Ltd. RNR, earnings ESP of +3.15% and a Zacks Rank #1 (Strong Buy).

ACE Limited ACE earnings ESP of +1.41% and a Zacks Rank #2 (Buy).

Cigna Corp. CI, earnings ESP of +0.65% and a Zacks Rank #3 (Hold).