Enbridge, Ingersoll-Rand: Ratings Changes

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BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded oil-and-gas transporter Enbridge(ENB Quote) to "buy."

The numbers: Second-quarter net income fell 40% to $395 million, or $1.08 a share, as revenue decreased 26% to $2.9 billion. Its gross margin rose from 9% to 16% and its operating margin climbed from 5% to 10%. The company has a precarious financial position, with $354 million of cash, compared to $12 billion of debt. A debt-to-equity ratio of 1.7 demonstrates higher-than-ideal leverage.

The stock: Enbridge has advanced 26% this year, more than the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio of 11, a discount to the market and oil and gas transportation peers. Shares pay a 3.4% dividend yield.

The model upgraded machinery maker Ingersoll-Rand(IR Quote) to "hold."

The numbers: Second-quarter net income fell 52% to $122 million and earnings per share dropped 54% to 41 cents. Revenue grew 13% to $3.5 billion. Its gross margin fell from 32% to 30% and its operating margin declined from 13% to 8%. A quick ratio of 0.7 reflects less-than-ideal liquidity. A debt-to-equity ratio of 0.7 indicates reasonable leverage.

The stock: Ingersoll-Rand has risen 85% this year, outpacing major U.S. indices. The company posted losses in the previous two quarters. The stock pays a 0.9% dividend yield.

The model upgraded mass-marketing specialist Valassis Communications(VCI Quote) to "hold."

The numbers: Second-quarter net income surged 141% to $16 million and earnings per share jumped 135% to 33 cents. Revenue declined 9% to $544 million. Its gross margin rose from 25% to 27% and its operating margin increased from 6% to 8%. The company has adequate liquidity, evident in its quick ratio of 1.3. A debt-to-equity ratio of 25 reflects excessive leverage.