Loews Corp (L) Q2 Earnings Beat Unlikely: Stock At Risk?

Loews Corp. (NYSE:L) is set to report second-quarter 2016 results on Aug 1, before the market opens. Last quarter, it posted a negative earnings surprise of 42.31%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Past Quarter

Lower contract drilling revenues, reduced exploration and production budgets and an influx of new rig deliveries are likely to weigh on the performance of Diamond Offshore (NYSE:DO) . However, new drill ships that are on long-term charters are expected to drive revenues.

Then again, a still low soft interest rate environment may restrict the desired upside.

Loews Hotels’ results are expected to improve on its operational strength.

However, CNA Financial (NYSE:CNA) is expected to perform well given the underlying strength in its business. While the commercial lines business remains well poised, the company is also focused on perking up its specialty business.

Continued share buyback should boost the bottom line.

With respect to the surprise trend, Loews missed expectations in each of the last four quarters, with an average negative surprise of 33.22%.

The company’s share price has been fluctuating over the last few days. We wait to see how the stock reacts to the quarter’s results.

Earnings Whispers

Our proven model does not conclusively show that Loews is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Loews has an ESP of 0.00%. This is because both the Most Accurate estimate stands and the Zacks Consensus Estimate are pegged at 57 cents per share.

Zacks Rank: Loews has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stock to Consider

Here is a multiline insurer that has the right combination of elements to post an earnings beat this quarter:

Prudential Financial Inc. (NYSE:PRU) with an Earnings ESP of +0.40% and a Zacks Rank #3. The company will release second-quarter earnings results on Aug 3.