Loews' Diamond Offshore Remains Soft, Hotels on Track - Analyst Blog

On Dec 18, 2014, we issued an update research report on Loews Corporation (L).

Loews posted weaker than expected third-quarter results, wherein net operating earnings missed the Zacks Consensus Estimate and also deteriorated year over year. The quarter witnessed lower earnings at CNA Financial (CNA) and Diamond Offshore (DO). In addition, investment income witnessed a downturn due to limited partnership and equity-based investments. Expenses increased during the quarter as well.

This prompted a downtrend in the Zacks Consensus Estimate for 2014 and 2015 as all the estimates were revised downward over the last 60 days. The same declined 11.4% to $2.57 for 2014 and 6.5% to $3.19 for 2015. Loews currently carries a Zacks Rank #3 (Strong Sell).

Performance at Diamond Offshore remained soft. The third quarter suffered from lower rig utilization and an impairment loss related to the carrying value of six semisubmersible rigs.  Revenues from deepwater and mid-water floaters and jack-up rigs remained low.

On a positive note, Diamond Offshore inked a contract with Hess Corporation for the last two of Diamond's new build drill ships. The contract is estimated to generate combined total revenue of about $1 billion and represent seven years of contract drilling backlog.

However, both CNA Specialty and CNA Commercial improved their underlying loss and combined ratios. Both continue to experience rate increase as well as solid retentions.

Presently operating a chain of 21, Loews remains focused on strengthening its hotel business. It is on track to take the tally to more than 30 in order to triple its net income by 2015.

Riding on the strength of strong liquidity, Loews engages in regular buybacks as it sees this as one of the main drivers of shareholder value. The company has also noted that share repurchases have greatly contributed to the significant long-term outperformance of the stock versus the S&P 500.

Other Stocks to Consider

A better-ranked multiline insurer worth considering is CNO Financial (CNO), sporting a Zacks Rank #1 (Strong Buy).