Loews Corporation: Updated Research Report - Analyst Blog

We issued an update research report on Loews Corporation L on May 21, 2014.

The company posted dismal first-quarter 2014 results with net operating earnings of $68 cents per share failing to meet the Zacks Consensus Estimate by 9.3% and deteriorating from the year-ago earnings by 18%. The Zacks Consensus Estimate also witnessed estimate declines over the last 30 days. It currently stands at $3.01 (down 5.3% as all three estimates trended down) and $3.76 (down 4.8% as 2 of 3 estimates moved south) for 2014 and 2015, respectively.

Nonetheless, this Zacks Rank #3 (Hold) insurer witnessed higher parent company investment income in the first quarter courtesy of better performance by the trading portfolio as well as lower ceiling test impairment charges at HighMount. However, Loews incurred charges for the write-off of all previously capitalized costs incurred by it and Boardwalk Pipeline for the Bluegrass project.

Performance at Diamond Offshore Inc. DO remained soft. Results suffered due to lower utilization and increase in interest expense due to higher debt levels. Fewer revenue earning days from ultra-deepwater, deepwater and mid-water floaters weighed on contract drilling revenues. Though Diamond Offshore continues to improve its fleet, a weakening ultra-deepwater and deepwater market will dampen results.

HighMount, another subsidiary of Loews, continues to generate lower revenues and income due to lower sales volume stemming from lesser drilling activity. HighMount is focusing on drilling activities, in particular the Mississippian line in Oklahoma, and the Wolfcamp strata in Sonora, TX. This could result in higher oil production.

Loews remains focused on strengthening its hotel business. It presently operates in 19 hotels and envisions to take the count to more than 30, within four years and triple its net income by 2015.

Other Stocks to Consider

Some better-ranked multiline insurers worth considering are Horace Mann Educators Corp. HMN and Old Republic International Corporation ORI. Both sport a Zacks Rank #1 (Strong Buy).