This P&C and energy services company beat EPS estimates by, $0.03 last quarter. The company has a strong balance sheet and is forecast to grow at a 20.69% annual rate over the next five years.
Loews Corporation (L)
From Adrian Day, Adrian Day’s Global Analyst
Loews Corp. (L, NY, 48.07) saw mostly positive operating results from its holdings, particularly its largest, CNA Insurance, whose new business lines are developing well; CNA accounts for about 70% of the value of each Loews’ share. Offsetting that was a modest decline in earnings at Loews Hotels and ongoing and growing losses at Diamond Offshore.
Despite a long-lasting, very weak market, Diamond continues to enhance its fleet while maintaining a good balance sheet. Since its earnings are consolidated into the parent, it adds to quarterly fluctuation, but it represents only about $2 per share of value.
With about $3.5 billion in cash and investments at the holding company level—80% of it in cash—Loews has a rock-solid balance sheet with which it continues to buy back its own shares, adding another 3 million shares this past quarter. This is a long-term trend for the company; shares outstanding stood at 332 million at the end of 2017 and now stand at 303 million. Indeed, a decade ago, Loews had 40% more shares out than it does today.
Notwithstanding its healthy balance sheet, Loews says it is unlikely to add another major business to its portfolio, believing businesses are very expensive in the current easy money environment.
Given its low dividend yield, Loews is usually valued on a sum-of-the-parts basis. Today, its book value is $64.49 per share, most of which is in publicly listed, and therefore easy to value, companies. This 25% discount is compelling, close to the 10-year highs in the range, though there have been spikes a couple of times.
A recovery in the oil market, and specifically the offshore exploration business, would boost the company’s reported earnings. We would accumulate near the current price level.
Adrian Day, Adrian Day’s Global Analyst, www.adriandayglobalanalyst.com, 410-224-8885, August 31, 2019