We recently maintained a Neutral recommendation on
Leucadia National Corporation
(
LUK
), expecting the company to perform in line with the market.
Leucadia's extensive diversifications into a variety of businesses
including manufacturing, oil and gas drilling services, gaming
entertainment, real estate activities, medical product development
operations and various other investment activities bode well for
the future growth of the company.
Moreover, the acquisition of Nation Beef Packaging Company, LLC,
has added a new dimension to the company's existing portfolio.
Starting the first quarter 2012, the company commenced with its
beef processing services. The new business accounted for roughly
89% of the company's second quarter 2012 total revenue.
Despite these positives, the company has to grapple with issues
like rising cost of cattle; the prices of which are beyond the
company's control. This limits the business from flourishing and
accounts for a major portion of the company's total cost of sales.
Also, animal health and disease issues restrict growth while
geopolitical risks act as a major impediment to international trade
growth.
Moreover, general housing market weakness, investments in volatile
materials, and intense competition from its peers including
Apollo Investment Corporation
(
AINV
) and
The Blackstone Group
(
BX
) add greatly to our concerns for the company.
Second quarter 2012 was not very exciting for the company as
results plummeted badly and entered the negative zone resulting in
a loss per share of 81 cents. This is in comparison with the
earnings of $1.97 in the first quarter 2012 and 74 cents earnings
in the year-ago quarter. Expenses rose in the quarter from just
$234 million in the year-ago quarter to $2.1 billion, representing
roughly 96.7% of total revenue.
The current Zacks Consensus Estimate for the third quarter of 2012
is 42 cents, representing a year-over-year growth of 135.3%.
Estimates for 2012 and 2013 are at $3.35 and $1.68, respectively.
APOLLO INV CP (AINV): Free Stock Analysis
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BLACKSTONE GRP (BX): Free Stock Analysis Report
LEUCADIA NATL (LUK): Free Stock Analysis Report
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