Loews Corporation L reported first-quarter 2015 operating earnings of 72 cents per share, missing the Zacks Consensus Estimate by about 4%. Earnings also lagged about 12.2% year over year. The quarter suffered due to lower earnings at Diamond Offshore and a less favorable performance by the parent company’s trading portfolio.
Including asset impairment charges at Diamond Offshore Drilling, Inc. DO, the company reported net earnings of 29 cents per share, which compared favorably with 15 cents earned in the year-ago quarter.
Revenues
Loews’ total revenue declined 5.7% year over year to $3.5 billion in the quarter. Lower insurance premiums as well as decreased contract drilling revenues induced the downside.
Behind the Headlines
Total expenses increased 6.3% year over year to $3.4 billion on higher other expenses.
CNA Financial’s CNA revenues declined 3.3% over the prior-year period to $2.3 billion. It reported net income attributable to Loews Corp. of $202 million, up 14.8% year over year. The improvement resulted from an increase in investment income driven by limited partnerships and better current accident year underwriting results. However, lower realized investment gains were partial dampeners.
Boardwalk Pipeline Partners, LP’s BWP revenues decreased 7.6% year over year to $330 million. Its reported net income attributable to Loews Corp. improved to $25 million from a loss of $18 million incurred in the year-ago quarter.
Loews Hotels’ revenues improved about 32.4% year over year to $139 million. Earnings attributable to Loews doubled to $10 million from the year-ago quarter. The improvement was prompted by better performances by the acquired properties as well as an increase in equity income from joint venture properties.
Diamond Offshore’s revenues declined 11.7% year over year to $627 million. Loss of $126 million compared unfavorably with $69 million earned in the year-ago quarter. Asset impairment charge related to the carrying value of eight drilling rigs along with lower rig utilization and higher depreciation expense accounted for the poor results.
Book value as of Mar 31, 2015 was $51.18 per share, up about 3.5% from $49.43 as of Mar 31, 2014.
Share Repurchase
During the first quarter of 2015, Loews spent $71 million on buying back 1.8 million shares. It also bought 0.9 million shares of Diamond Offshore for $24 million.
Our Take
Loews remains on track to strengthen its hotel business as evident by a considerable improvement in its top line. However, Diamond Offshore experienced lower rig utilization.
Despite a still-soft interest environment, investment income showed strength. Loews also continues to deploy capital to enhance shareholder value via share buybacks.
Loews currently carries a Zacks Rank #4 (Sell).
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