10-year

10-Year Anniversary Promotion (20% off)

Join GuruFocus Premium Membership Now for Only $279/Year

Once a decade discount

Save up to $500 on Global Membership.

Don't Miss It !

Free 7-day Trial
All Articles and Columns »

Natural Gas Will Become a Major Source of Power Generation

March 12, 2014 | About:

Loews Corp. (L) is a holding company with interest in property/casualty insurance (CNA Financial Corp., 90% stake); hotels (Loews Hotels Holding Corp.); offshore oil and gas drilling (Diamond Offshore Drilling Inc., 50%); exploration, production and marketing of natural gas and natural gas liquids (HighMount Exploration & Production LLC); and interstate natural gas pipelines (Boardwalk Pipeline Partners LP, 55%).

Gas Efficiency

The company is involved in the transportation and storage of natural gas and natural gas liquids (NGLs), and gathering and processing of natural gas. As a matter of fact, Boardwalk Pipeline formed a joint venture with Boardwalk Pipeline Partners LP. The acquisition of Boardwalk Louisiana Midstream and some projects like the Southeast market expansion or the expansion project at Eagle Ford will contribute with a good amount of new assets for Boardwalk.

The proposed project would include constructing a new pipeline that would initially provide producers with 200,000 barrels per day of mixed NGLs take-away capacity. Capacity could be increased to 400,000 barrels per day to meet market demand, primarily by adding additional liquids pumping capacity.

In March 2013, Williams' board approved the company's Bluegrass Pipeline project, and later Boardwalk entered into a joint venture with Williams to continue the development process for the proposed Bluegrass Pipeline.

The Hotel Business

Despite that the company generated 3% of full-year 2013 revenues in its hotel subsidiary, it plans to strengthen its business with the acquisition of more hotels. The aim is to have about 30 in the medium term. Moreover, Loews Hotels & Resorts plans to open a 400-room hotel in Chicago next year and recently announced plans to open a 1,800-room Cabana Bay Beach Resort at Universal Orlando in 2014.

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 29x, a premium compared to an average of 12.2x for the industry. To use another metric, its price-to-book ratio of 0.88x indicates a discount versus the industry average of 1.2x and the price-to-sales ratio of 1.15x is above the industry average of 1.12x.

Earnings per share (EPS) decreased in the most recent quarter compared to the same quarter a year ago ($-0.51 versus $-0.08). We include in the next graph the stock price because EPS often lead the stock price movement.

1394634624959.png

Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. With a ROE of 3.06% is below the industry mean of 8.7%. Others more attractive options in terms of this ratio are the following competitors:

Company

Ticker

ROE (%)

American International Group

AIG

9,04

Transocean Ltd.

RIG

8,43

The Travelers Companies, Inc

TRV

14,81

Final Comment

Loews' revenue growth was positive and I expect this trend to continue as well as the earnings per share improvement. For this year Wall Street expects an improvement in earnings, to $3.53 from $1.53. Despite the wide range of risks such as hurricane damage and oil prices, I would recommend investors to consider adding the stock for their long-term portfolios. The firm currently has a Zacks Rank #3 (Hold) and upgraded their long-term recommendation from Neutral to Outperform.

Hedge fund gurus have also been active in the company in fourth quarter 2013. Gurus like Steven Cohen (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Donald Smith (Trades, Portfolio) have taken long positions in the stock.

Disclosure: Vanina Egea holds no position in any stocks mentioned.

About the author:

Vanina Egea
A fundamental analyst at Lone Tree Analytics

Visit Vanina Egea's Website


Rating: 5.0/5 (3 votes)

Voters:

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK