Loews Delivers a Weak 4th Quarter - Analyst Blog

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Loews Corporation ( L ) reported its fourth-quarter 2011 adjusted net income of 77 cents per share, lagging the Zacks Consensus Estimate of 84 cents. Earnings were also far below the $1.17 earned in the prior-year quarter. Adjusted net income was $308 million, dropping 36.9% from $488 million in fourth-quarter 2010.

The weak performance was largely attributable to lower investment income from limited partnership, increase in insurance reserves for its payout annuity business, lower earnings at Diamond Offshore and weak performance of equity investments.

Including net investment losses of $40 million, Loews reported net income of $268 million or 67 cents per share, comparing unfavorably with $466 million or $1.12 per share in the year-ago quarter. The prior-year quarter includes net investment loss of $22 million.


Full year 2011 adjusted income came in at $2.70, lower than the Zacks Consensus Estimate of $2.76 as well as year ago earnings of $3.05. Adjusted income was $1.095 billion, down 14.5% over 2010.

Including net investment losses of $31 million, Loews reported net income of $1.064 billion or $2.63 per share, comparing unfavorably with $1.288 billion or $3.07 per share in the year-ago quarter.

Operational Performance

Total revenue at Loews in the fourth quarter was $3.47 billion, declining 6.3% from $3.71 billion in the prior-year quarter. A lower net investment income coupled with investment losses and lower contract drilling revenues in the quarter led to the revenue decline.

Full year 2011 total revenue declined 3.3% year over year to $14.1 billon.

Total expense in the quarter increased 8.2% year over year to $2.99 billion while full year expense increased 1.6% over 2010 to $11.89 billion. The increase was mainly due to higher insurance claims and policyholders' benefits and higher contract drilling expenses.

Loews Hotels recorded the only positive growth in revenue in the fourth quarter as well as in the full year. Revenue increased 10.3% over the prior-year period to $86 million in the quarter. Full-year revenue improved 9.4% over 2010 to $337 million.

Loews Hotels posted a profit of $1 million in the fourth quarter. Full year income surged thirteen times to $13 million.

Diamond Offshore 's ( DO ) revenue decreased 8.3% year over year to $752 million with full year revenue decreasing 0.8% year over year.

Earnings also declined 22% year over year in fourth quarter while full year earnings increased 1.1% over 2010.

The Boardwalk Pipeline's revenue decreased 2.3% to $301 million from the prior-year level. However, full year revenue increased 1.3% year over year $1.1 billion.

Earnings dipped 38% year over year to $21 million in the fourth quarter while full year earnings declined 32.5% over 2010.

However, CNA Financial 's ( CNA ) revenue declined 1.9% over the prior-year period to $2.3 billion in the quarter. Full-year revenue declined 1.4% from 2010 to $8.98 billion.

CNA Financial reported net income attributable to Loews Corp. of $192 million, plummeting 35.4% year over year while full year net income was $569 million, down 6.6% over 2010.

High Mount Exploration revenue was $93 million, declining 10.6% year over year. Full year revenue was $390 million, declined 1.3% year over year.

Reported earnings of $12 million declined 42.8% year over year while full year earnings were $62 million, declining 19.5% from 2010.

Book value as of December 31, 2011, was $47.49 per share, up 6.7% from $44.51 as of December 31, 2010.

Share Repurchases

Loews spent $28 million in the fourth quarter to buy back 0.8 million shares. For full year 2011, the company bought back 18.2 million shares for $718 million.

Peer Comparison

The Travelers Companies ( TRV ), which competes with Loews, operating earnings of $1.48 per share in the fourth quarter, lagging the Zacks Consensus Estimate of $1.52 per share. Results were far behind earnings of $1.89 in the prior-year quarter. The decline was primarily due to lower net investment income and lower underwriting gains stemming form lower net favorable prior-year reserve development.

Full year 2011 operating earnings were $3.28 per share, 2 cents behind the Zacks Consensus Estimate.

We maintain our Neutral recommendation on Loews over the long term. The quantitative Zacks #4 Rank (short-tem Sell rating) for the company indicates downward pressure on the shares over the near term.


 
CNA FINL CORP ( CNA ): Free Stock Analysis Report
 
DIAMOND OFFSHOR ( DO ): Free Stock Analysis Report
 
LOEWS CORP ( L ): Free Stock Analysis Report
 
TRAVELERS COS ( TRV ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CNA , DO , L , TRV

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