Q4 Earnings Send Loews To All Time Highs

Shares of conglomerate Loews NYSE: L opened up close to 7% and at all-time highs on Monday after the company reported their Q4 earnings before the bell. The results broadly topped expectations and confirmed the good times are back. This quarter last year, earnings were deep in the red. This time, black is the new red.

Operating revenues were up close to 18% year on year with higher insurance premiums, investment income and investment gains helping to drive the engine. Insurance name CNA Financial NYSE: CNA, which Loews is a majority stakeholder in, saw revenues rise over 15%. Crucially, its net income attributable to Loews swung from a loss of $75 million this time last year to $244 million now.

Loews’ stakes in Boardwalk Pipeline and Diamond Offshore NYSE: DO also bore some fruit while Loews Hotels lagged with a net loss of $59 million versus a gain of $7 million a year ago. This was explained by impairment charges related to the carrying value of hotel properties and will be something management look to improve on for the next outing.

Through last month, shares had been trading sideways since August having fallen 16% from all-time highs they had just notched. Monday’s open had them changing hands at even higher prices and at a full 20% premium to the post-August lows.

Could Shares Have Recovered Faster?

Considering Loews’ stock fell close to 70% in the aftermath of the 2008 crash, this is no mean feat. Shares are now up a full 230% since the 2009 low. However, when one considers how much better the likes of Marriott NYSE: MAR, Hilton NYSE: HLT, Hyatt NYSE: H and Wyndham NYSE: WYND have performed, investors will be wondering if Loews missed a trick by having too many fingers in too many pies.

Over the same timeframe (since February 2009), Wyndham’s stock is up over 2,700% and Marriott’s is up 1,000%. Since February 2016, Hilton’s stock is up 190%, Hyatt’s is up 122% while Loews’ lags at the back with just a 55% rally.

To be sure, it’s not a pure hotel stock like the rest, but these comparisons serve to show just how much dead weight the company is carrying with its oil and gas initiatives. These, like many other energy names, have been under a lot of pressure in recent years as energy prices have squeezed margins and profits to nothing. Looking at Diamond Offshore by itself, shares are down at all-time lows and full 97% off 2008 levels.

With crude oil trading at 2005 levels and down 25% this year alone, any hopes for a recovery rally back towards 2010/11/12 prices are dead in the water.

Getting Involved

But investors in conglomerate’s like Loews understand that by having such diversified holdings, they’re going to be exposed to at least some cyclical pressures. In the meantime, they’re making money on the bottom line and are seeing improvements in all the right places. Any turnaround in the energy sector will only bring good things. For now, CNA Financial stock is trading close to all-time highs as its 600+% rally off the lows of 2009 continues. Loews owns about 90% of the insurer and will be buoyed by its standout performance.

When all is said and done, investors looking to get involved in Loews could do worse than pick up stock at all-time highs. It could be worth seeing where the dust settles in the next few days and if the stock likes being up there. On the weekly chart, RSI is only at around 66 while the MACD is about 6 weeks into a bullish crossover that bodes well for current momentum.