Leucadia (LUK) Q3 Earnings Improve Y/Y on Solid Revenues - Analyst Blog

Leucadia National Corporation (LUK) reported impressive results for third-quarter 2014. Earnings from continuing operations came in at $52.7 million or 14 cents per share, substantially above $18.3 million or 5 cents per share earned in the year-ago quarter.

Revenues

Leucadia generated net revenues of $3,003.6 million, increasing 18.6% year over year. The top-line improvement can be attributed to higher revenues from beef-processing services, commissions, principal transactions, investment banking business and interest income.

Leucadia reports its revenue results under the following heads:

Revenues from the Beef Processing Services segment were $1,983.3 million, up 3.2% year over year. It represented 66% of net revenues in the quarter.

Investment Banking & Capital Markets – the segment created after the merger with Jefferies in Mar 2013, generated revenues of $840.4 million, accounting for roughly 28% of net revenue. Compared with the year-ago quarter, the segmental revenue soared 67.1% year over year.

Revenues from Other Operations segment, which comprises manufacturing, energy projects, asset management and real estate businesses, surged 65.9% year over year to $148.5 million. It represented 4.9% of net revenue. Revenues from the Corporate segment, nearly 1% of net revenue, came in at $31.5 million, up from $18.8 million in the year-ago quarter.
 
Expenses/margins

Leucadia's cost of sales increased 5.2% year over year, representing 66.6% of net revenue versus 75.1% in the year-ago quarter. Selling, general and other expenses constituted 8.8% of net revenue, up 180 basis points year over year. Compensation and benefits amounted to $516.6 million versus $321.7 million recorded in the year-ago quarter.

Operating margin was 3% versus 1.3% in the prior-year quarter.

Balance Sheet

Exiting third-quarter 2014, Leucadia had cash and cash equivalents of $4,247.9 million, up 1.5% from $4,186.7 million in the preceding quarter. Long-term debt inched down 2% to $8,619.2 million from $8,798.1 million at the end of second-quarter 2014.

Cash Flow

In the nine months ended Sep 30, 2014, Leucadia used cash of $1,264.3 million for its operating activities versus $938.7 million of cash generated in the year-ago comparable period. Capital spending on property, equipment and leasehold were $468.7 million, significantly above $89.4 million spent in the year-ago period. Cash dividends paid amounted to $69.8 million.

Leucadia currently has a market capitalization of $8.8 billion. Some major players in the diversified operations industry include Carlisle Companies Incorporated (CSL), Federal Signal Corp. (FSS) and CLARCOR Inc. (CLC). While both Carlisle Companies and Federal Signal sport a Zacks Rank #1 (Strong Buy), CLARCOR carries a Zacks Rank #2 (Buy).