Loews Corporation (NYSE: $L) is an American conglomerate based in New York City with diversified interests in packaging, hospitality, insurance, and energy. Its operations are carried out via its subsidiaries: Boardwalk Pipelines, Loews Hotel, CAN Financial, and Altium Packaging.
On Monday, May 6, 2024, Loews Corp released its Q1 results for fiscal 2024 before markets opened to a tepid reception.
Loews Reports Profit Spike in Q1 Results
For the first quarter of fiscal 2024, Loews reported a 22% spike in profits to $457 million or a $2.05 EPS compared to $375 million and a $1.61 EPS in Q1 2023. Total revenue surged 11.84% to $4.23 billion in the quarter compared to $3.78 billion in Q123, with 81.40% coming from CNA Financial.
Subsidiary Performance
CNA
CNA Financial accounted for most of the revenue at $3.44 billion, a 9.26% increase from the previous year. Net income from the unit came in at $310 million, a 16% spike from the $268 million recorded the previous year, while the unit’s core income rose 9% to $355 million.
Boardwalk
Boardwalk saw revenue spike 30.23% to $517 million from $397 million the previous year, while net income surged 41% to $121 million. The unit’s EBITDA rose 20% to $307 million from $256 million the previous year. The spike in EBITDA and net income was driven by higher transportation revenues, increased parking and storage revenue, recently commissioned growth projects, and the positive impact of the Bayou Ethane purchase.
Loews Hotels
Loews Hotels saw a 12.5% revenue spike to $216 million compared to $197 million the previous year. However, net income declined 33.33% to $16 million from $24 million the previous year, driven by high pre-opening expenses for the Loews Arlington Hotel and Convention Center and higher depreciation. Additionally, the unit experienced lower equity income from joint ventures due to a drop in Orlando occupancy rates.
Consequently, the adjusted EBITDA from Loews Hotels experienced a 6.98% decline to $80 million from $86 million the previous year.
Corporate
The corporate division saw a 28.57% spike in revenue to $54 million compared to $42 million the previous year. Net income spiked 433.33% from a loss of $3 million to a $10 million profit, driven by a higher investment income from equity securities.
At the end of Q124, Loews had $3.2 billion in cash and cash investments and a debt of $1.8 billion. Since the end of December 2023, the company has bought back $67 million worth of shares.
CEO Comments
Commenting on the results, James S. Tisch, CEO of Loews Corp, stated, “Loews had an exceptional quarter driven by stellar results at CNA and Boardwalk. CNA continues to experience strong profitable growth, reporting its highest ever first quarter core income.”
Loews Stock Performance
Following the the positive results, Loews Corp stock saw a 0.54% increase a few minutes after the opening bell to $76.81 as of 09:35 AM EDT. The increases follows a 0.17% dip on Friday, May 3, to close at $76.40 per share. L stock is up 8.43% since the start of the year., and over the past 52 weeks, it has spiked 30.13% compared to the 22.38% gain of the SPX as of Friday’s closing price.
The stock has a market cap of $17.133B with a price-to-sales ratio of 1.11. It has a trailing price-to-earnings ratio of 12.15, almost twice as cheap as Progressive (PGR), which has a trailing P/E ratio of 21.36.
Is Loews (L) Undervalued?
Compared to Progressive, which holds the largest share of the Insurance – Property & Casualty industry on the S&P 500, Loews is massively undervalued. In the past, CEO James S. Tisch has commented on the company’s stock valuation. According to him, a major reason for the stock’s low valuation is the lack of analysts’ coverage, known as the “Neglected Firm Effect.”
Should You Buy Loews (L) Stock?
The company’s net income improvement reflects its ability to adapt to headwinds and optimize revenue streams and income. Loews’ commitment to capital returns for its shareholders, a healthy balance, manageable debt levels, and excellent cash flow enhances the case for future revenue growth. Consequently, with L trading at lower multiples compared to industry peers, it would be a great addition to a portfolio as a long-term investment.
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