We recently maintained a Neutral recommendation on
Leucadia National Corporation
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Long-term growth prospects seem bright for Leucadia due to its
diversification into a variety of businesses including
manufacturing, gaming entertainment, real estate, medical product
development operations and various other investment activities.
Also, its entry into beef processing business is working in its
Over time, Leucadia has grown through meaningful acquisitions and
dispositions of non-core or non-profitable assets. Of the many
acquisitions, particularly that of National Beef Packaging
Company, LLC, has added a new dimension to the company's existing
Also, disposal of stakes in Fortescue and merger of Jefferies are
likely to bode well for the company. Jefferies merger is likely
to open up more investment opportunities for Leucadia and be a
long-term growth booster.
Despite these positives, disappointing results for the first
quarter 2013 and the near-term concerns surrounding the stock
force us to remain on the sidelines. Earnings per share on the
quarter came in at $1.08, way below $1.97 earned in the year-ago
quarter. Revenue plunged 10.1% due to weak revenue generation in
the company's Beef Processing Services and Corporate segments.
Expenses, in relation to revenue represent 93.7% compared with
85.1% in the year-ago quarter.
Moreover, Leucadia has to grapple with issues like rising cost of
cattle, animal health and disease issues, geopolitical risks,
general housing market weakness, investments in volatile
materials, and intense competition from its peers.
Other Stocks to Consider
Leucadia currently has a market capitalization of $11.3 billion.
Other major players in the industry are
China Merchants Holdings (International) Company
), with a Zacks Rank #1 (Strong Buy) while
Compass Diversified Holdings
Honeywell International Inc.
), each has a Zacks Rank #2 (Buy).