Loews Corporation (L) reported its first-quarter 2011 adjusted net income of 89 cents per share lagging the Zacks Consensus Estimate of 91 cents. Results were below 97 cents earned in the prior-year quarter. Adjusted net income was $370 million, 10% lower than $357 million in first-quarter 2010.
Lower earnings at Diamond Offshore reflecting reduced dayrates and utilization coupled with slightly lower earnings at CNA Financial Corporation, induced the weaker-than-expected results.
Including net investment losses of $12 million, Loews reported net income of $382 million or 92 cents per share, down from $420 million or 99 cents per share in the year-ago quarter. The prior-year quarter includes net investment gains of $11 million.
Operational Performance
Total revenue at Loews in the fourth quarter was $3.68 billion, down 1.2% from $3.71 billion in the prior-year quarter. The decline was primarily led by lower contract drilling revenues.
Total expense in the quarter increased 3.2% year over year to $2.91 billion. An increase in insurance claims as well as higher contract drilling revenues largely inflated the cost.
CNA Financial’s revenue increased a trifle over the prior-year period to $2.3 billion in the quarter. Net loss attributable to Loews Corp. dipped 8% year over year to $190 million in the quarter.
Diamond Offshore’s revenue dropped 6% year over year to $809 million. Earnings also declined 14% year over year to $117 million in the quarter.
High Mount Exploration revenue was $104 million, plunging 30% year over year. Reported earnings of $19 million declined 41% from the year-ago quarter.
However, the Boardwalk Pipeline’s revenue increased 3% to $311 million from the prior-year level. Earnings improved 13% year over year to $33 million.
Loews Hotels revenue increased 7% over the prior-year period to $80 million in the quarter. Earnings were $2 million compared with a loss of $1 million incurred in the prior year quarter.
Book value as of March 31, 2011, was $45.54 per share, up 2.3% from $44.51 as of December 31, 2010.
Share Repurchases
Loews spent $187 million in the quarter to buy back 4.4 million shares. Subsequent to the first quarter through April, the company bought back another 1.9 million shares for $82 million.
Peer Comparison
The Travelers Companies (TRV), which competes with Loews, reported operating earnings of $1.89 per share in the first quarter, surpassing the Zacks Consensus Estimate of $1.55 by $0.34. Results were also ahead of $1.22 earned in the prior year quarter. Operating income was $826 million, up 31% from $631 million in the first quarter of 2010.
Higher underwriting gains, favorable resolution of prior-year tax matters, lower catastrophe losses and lower outstanding shares helped the company to post improved results.
Our Take
CNA Financial’s agreement with National Indemnity has helped it shed all its asbestos and environmental liabilities thus, imparting stability. Also, Boardwalk’s increased capacity and expansion projects and improved financial market conditions bode well. A strong balance sheet with low leverage and adequate cash are the other positives.
However, lower earnings at the operating subsidiaries, volatile natural gas and oil prices and a challenging economic environment keep us cautious. We maintain our Neutral recommendation on Loews over the long term. The quantitative Zacks #3 Rank (short-tem Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
LOEWS CORP (L): Free Stock Analysis Report
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