We are downgrading
) to Neutral from Outperform on the back of disappointing second
quarter results. Earnings substantially missed the Zacks Consensus
Estimate and the year- ago results. Lower earnings at Diamond
Offshore and soft results from equity and limited partnership
investments at the parent company weighed on the results.
BOARDWALK PIPLN (BWP): Free Stock Analysis
DIAMOND OFFSHOR (DO): Free Stock Analysis
LOEWS CORP (L): Free Stock Analysis Report
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posted lower earnings in the second quarter yet again, attributable
to lower utilization of rigs as more of them were going through
special surveys, lower day rates, higher contract drilling expenses
including the costs of the special surveys. However, the
ultra-deepwater and deepwater floater markets are gaining momentum,
in particular the ultra-deepwater, where there were a few
uncontracted rigs available for work in 2012. As a result, it
expects boost on dayrates for the remainder of 2012. It has more
than 90 floater rigs, ultra-deepwater and deepwater units, on order
or under construction.
Another subsidiary, HighMount generated lower revenue and income
due to lower sales volume stemming from lower drilling activity as
well as decline in natural gas prices. They also recorded a
non-cash ceiling test impairment charge of $142 million related to
the carrying value of natural gas and oil properties.
On the positive side, Boardwalk Pipeline, a subsidiary of Loews,
formed a joint venture with
Boardwalk Pipeline Partners LP
) to foray into the natural gas liquids business. Natural gas is
usually an attractive choice because of its relative fuel
efficiency, low emissions, quick construction timelines and low
capital costs. Gradually, it is expected to become a major source
of power generation.
Also, Loews scores strong with credit rating agencies. Fitch
Ratings reiterated the long term Issuer Defaults Rating at 'A+' of
Loews. The rating agency also affirmed the senior unsecured debt
ratings at 'A+.' The outlook remains stable. Also, Moody's
Investors Service upgraded the senior unsecured ratings of Loews,
CNA Financial and Diamond Offshore to A2. Moody's also reiterated
CNA insurance company's financial strength ratings and upgraded the
outlook on these ratings to positive from stable.
Loews has a Zacks #3 Rank (Hold), indicating no clear directional
pressure on the shares over the near term.