Loews Corporation L stands on a firm ground for growth, given its market focus, strategic acquisitions and a solid balance sheet. The Zacks Rank #3 (Hold) insurer looks promising, banking on several growth drivers.
Growth Projections: The Zacks Consensus Estimate for earnings per share is $3.05 on revenues of $13.2 billion for 2017. While the bottom line reflects 14.5% growth, the top line shows a year-over-year increase of 0.8%. For 2018, the Zacks Consensus Estimate for earnings per share is pegged at $3.13 on revenues of $13.4 billion. The bottom line reflects 2.3% growth, while the top line represents a 1.7% year-over-year rise.
Positive Earnings Surprise History: Loews has surpassed the Zacks Consensus Estimate in three of the last four quarters. The company’s average four-quarter surprise is 24.45%.
An Outperformer: Loews’ shares have gained 0.2% quarter to date as against the industry’s loss of 0.9% over the same time frame.
Shares Undervalued: Shares of the company are undervalued on a price-to-book value basis. Price-to-book ratio is the best multiple for valuing insurers, courtesy their unpredictable financial results. The shares are presently trading at P/B ratio of 0.7, lower than the industry average of 1.4. Also, the stock carries a Value Score of A. Value investors look for those with value lower than the intrinsic one.
Growth Drivers in Place
Loews remains optimistic about hotel business and retains focus to further strengthen the same. With capital at its disposal to acquire and develop properties, the company is seeking opportunities in Boston, Chicago, San Francisco, Washington, D.C., New York City, Dallas, Toronto and Seattle. This in turn will help the company cater to a larger customer base and ramp up the growth profile.
CNA Financial Corporation CNA, a subsidiary of Loews, is focusing to grow its specialty business while constantly focusing on cost containment. The company has been investing in information technology to boost underwriting capabilities. Although this will put pressure on the company’s margin in near term, the company seems to benefit over the long term. Notably, CNA Financial’s 20% dividend hike earned Loews an additional $12 million per quarter.
Loews formed Loews Packaging Group to fortify its network of manufacturing locations across the United States. The packaging industry offers scope for solid cash flow generation. The acquisition of Consolidated Container Company in May this year testifies the company’s efforts to expand through organic growth and bolt-on acquisitions.
Loews boasts a strong balance sheet and thus engages in regular buybacks, a key driver of shareholders’ value.
Stocks to Consider
Some better-ranked stocks from the same industry are CNO Financial Group Inc. CNO and MGIC Investment Corp. MTG, both carrying a Zacks Rank #2 (Buy) You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
CNO Financial develops, administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products. The company delivered a four-quarter average positive surprise of 6.69%.
MGIC Investment covers the U.S. single-family, first-time mortgage loans by providing primary insurance to cushion lenders against non-payment of individual loans. The company delivered a four-quarter average positive surprise of 31.88%.
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