Loews Corporation (L) reported its third-quarter 2011 adjusted net income of 44 cents per share, lagging the Zacks Consensus Estimate by 10 cents. However, results were far ahead of 5 cents earned in the prior-year quarter. Adjusted net income was $177 million, substantially higher than earnings of $19 million in third-quarter 2010.
Including net investment losses of $15 million, Loews reported net income of $162 million or 40 cents per share, higher than $36 million or 9 cents per share in the year-ago quarter. The prior-year quarter includes net investment gains of $37 million.
Operational Performance
Total revenue at Loews in the third quarter was $3.44 billion, declining 7.1% from $3.70 billion in the prior-year quarter. A much lower net investment income coupled with investment losses in the quarter led to the revenue decline.
Total expense in the quarter decreased 12.9% year over year to $2.99 billion.
Loews Hotels recorded the highest growth in revenue in the quarter. Revenue increased 10.8% over the prior-year period to $82 million in the quarter.
Diamond Offshore‘s (DO) revenue increased 5.8% year over year to $881 million. Earnings also improved 30% year over year to $121 million in the quarter.
The Boardwalk Pipeline’s revenue increased 1.9% to $269 million from the prior-year level. Earnings dipped 14.3% year over year to $18 million from $21 million reported in the third quarter of 2010.
However, CNA Financial‘s (CNA) revenue declined 4.3% over the prior-year period to $2.2 billion in the quarter. CNA Financial reported net income attributable to Loews Corp. of $84 million, reversing the loss of $140 million in the year ago quarter.
High Mount Exploration revenue was $95 million, declining 3.1% year over year. Reported earnings of $15.8 million declined 15.8% year over year.
Book value as of September 30, 2011, was $47.75 per share, up 2% from $46.81 as of June 30, 2011.
Loews spent $275 million in the quarter to buy back 7.5 million shares.
Peer Comparison
The Travelers Companies (TRV), which competes with Loews, reported operating earnings of 79 cents per share in the third quarter, lagging the Zacks Consensus Estimate by 20 cents. Results were far behind earnings of $1.81 in the prior year quarter. The decline was primarily due to underwriting losses stemming from higher catastrophe losses.
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.
