TSC Ratings' Updates: Bristol-Myers

The following ratings changes were generated on Tuesday, Dec. 23.

We've upgraded pharmaceutical company Bristol-Myers Squibb(BMY Quote) from hold to buy, driven by its revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue rose by 14.2% since the same quarter last year, outpacing the industry average of 10.3% growth, though EPS declined. Bristol-Myers' gross profit margin of 71.2% is very high, having increased from the same quarter a year ago, and it's net profit margin of 49.1% significantly outperformed the industry average. Net operating cash flow has significantly increased by 104% to $1,422.00 million, vastly surpassing the industry average cash flow growth rate of -23.44%. Net income increased by 200.5%, from $858 million to $2,578 million, significantly outperforming the S&P 500 and the pharmaceuticals industry. Bristol-Myers' debt-to-equity ratio of 0.5 is low but is higher than that of the industry average. The company's quick ratio of 1.7 is high and demonstrates strong liquidity.

We've downgraded an investment bank and institutional securities company Jefferies(JEF Quote) from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, generally weak debt management, disappointing return on equity and poor profit margins.

The company's debt-to-equity ratio is very high at 5.6 and currently higher than the industry average, implying very poor management of debt levels within the company. Return on equity has greatly decreased from the same quarter one year prior, a signal of major weakness within the corporation. Jefferies' gross profit margin of 25.9% is currently lower than what is desirable, having decreased significantly from the same period last year. Net income decreased by 180.7% compared with the same quarter a year ago, underperforming the S&P 500 and the capital markets industry.