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Why Is Loews (L) Up 3.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Loews (L). Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Loews due for a pullback? 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 drivers.

Loews Q4 Earnings Miss Estimates, Revenues Down Y/Y

Loews reported fourth-quarter 2018 earnings of 36 cents per share, which missed the Zacks Consensus Estimate by 32.1% and plunged 56.6% year over year.

The company witnessed catastrophe losses at CNA Financial Corporation, weak investment results at both CNA and the parent company, and poor operating results at Diamond Offshore.

Behind the Headlines

Operating revenues of $3.4 billion decreased 4.7% year over year. Lower net investment income as well as decline in operating revenues and other offset increase in premiums dragged down the top line.

Total expenses increased 13.7% year over year to $3.5 billion on higher insurance claims and policyholders' benefits as well as higher operating expenses.

Book value excluding accumulated other comprehensive income as of Dec 31, 2018 was $62.16 per share, up 7.3% from $57.91 as of Dec 31, 2017.

Full-Year Highlights

The company posted earnings of $1.99 per share on $14.1 billion revenues. The figures represent 42.3% and 2.4% rise over 2017.

Segment Details

CNA Financial’s revenues declined 1.8% from the prior-year quarter to $2.4 billion. Its reported net loss attributable to Loews Corp. was $75 million, which compared unfavorably with $193 million earned in the year-ago quarter. The quarter witnessed lower net investment income reflecting declines in CNA's limited partnership and common equity investments and realized investment losses against realized gains in the prior-year period. Also, the segment incurred underwriting losses in its core property & casualty business in the quarter

Boardwalk Pipeline’s revenues decreased 3.6% year over year to $326 million. Net income plunged 82.8% to $55 million. The company witnessed lower net transportation revenues, resulting primarily from a contract restructuring and reduced rates on contract renewals, offset in part by revenues from growth projects.

Loews Hotels’ revenues improved 5.2% year over year to $181 million. Income from Loews Corp. was $7 million, down 82.5% year over year.

Diamond Offshore’s revenues plunged 34.3% year over year to $234 million. Net loss attributable to Loews Corp. was $58 million, wider than $52 million incurred in the year-earlier quarter. This downside was due to lower revenues on persistently depressed market conditions affecting both rig utilization and average daily revenues.

Share Repurchase Update

The company bought back 20.3 million shares worth $1 billion in 2018. Subsequently, through Feb 8, 2019, it repurchased another 0.9 million shares for $44 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Loews has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Loews has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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