Leucadia Q2 Earnings Improve Y/Y on Solid Segmental Results - Analyst Blog

Leucadia National Corporation (LUK) posted earnings from continuing operations of 16 cents per share in second-quarter 2014. The bottom line grew 14.3% from 14 cents per share earned in the year-ago quarter.

Revenues

Leucadia generated net revenues of $2,852.1 million, reflecting an improvement of 6.6% over $2,675.7 million recorded in the prior-year quarter. Top-line growth was driven by higher revenues from beef-processing services, commissions, principal transactions, investment banking business and interest income.

The company reports its revenue results under the following heads:

Revenues from the Beef Processing Services segment were $2,009.1 million, expanding 4.6% year over year. As a percentage of net sales, the result was 70.4%.

Investment Banking & Capital Markets – the segment created after the merger of Leucadia with Jefferies in Mar 2013, generated revenues of $689.3 million, accounting for roughly 24.2% of net revenues. Compared with the year-ago quarter, the segmental revenue climbed 5.8% year over year.

Revenues from Other Operations segment, which comprises manufacturing, energy projects, asset management and real estate businesses, escalated 33.3% year over year to $113.8 million. It represented 4% of net revenues. Revenues from the Corporate segment, nearly 1.4% of net revenues, came in at $39.9 million, up from $18.4 million in the year-ago quarter.
 
Expenses/margins

Leucadia's cost of sales climbed 6.2% year over year and, as a percentage of sales, stood at 71.6% versus 71.8% in the year-ago quarter. Selling, general and other expenses were 6.6% of net revenue, down 70 basis points (bps) year over year. Compensation and benefits amounted to $424.2 million versus $409.4 million recorded in the year-ago quarter.

Operating margin was at 2.5% versus 1.8% in the prior-year quarter.

Balance Sheet

Exiting second-quarter 2014, Leucadia had cash and cash equivalents of $4,186.7 million, up 16.6% from $3,590.5 million at the end of the preceding quarter. Long-term debt increased 5.6% to $8,798.1 million from $8,331.3 million in the previous quarter.

Cash Flow

In first-half 2014, Leucadia used net cash of $1,112.2 million for its operating activities versus $447.5 million generated in the year-ago comparable period. Capital spending on property, equipment and leasehold were $165.8 million, above $54.3 million spent in the year-ago period. Cash dividends paid totaled $46.5 million.

Leucadia currently has a market capitalization of $9.0 billion. Other major players in the diversified operations industry include Federal Signal Corp. (FSS), Noble Group Limited (NOBGY) and CLARCOR Inc. (CLC). While Federal Signal and Noble Group sport a Zacks Rank #1 (Strong Buy), CLARCOR holds a Zacks Rank #2 (Buy).
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CLARCOR INC (CLC): Free Stock Analysis Report
 
FED SIGNAL CP (FSS): Free Stock Analysis Report
 
NOBLE GROUP LTD (NOBGY): Get Free Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research