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TheStreet.com Ratings: Top Five Large-Cap Stocks

TheStreet.com Ratings Staff

Each weekday, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site. This list, updated daily, is based on data from the close of the previous trading session.

Today, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.

In addition, the companies must rank near the top of all stocks rated by TheStreet.com Ratings' proprietary quantitative model, which looks at more than 60 factors. The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.

Today's list begins with Precision Castparts(PCP Quote), a manufacturer of complex metal components and products for the aerospace and industrial gas turbine industries. It has been rated a buy since March 2005.

The company has completed recent acquisitions to expand its casting, forging and fastener products offerings, which should fuel revenue growth. Precision also shows strong cash flow that has enabled it to repay debt while maintaining its dividend payout.

Since Precision depends on the aerospace industry for its top-line growth, any slowdown in that industry could lead to reduced demand for its products. Any fluctuations in the prices of basic materials or any unseen difficulty in integrating recent acquisitions could also be concerns.

Hotelier Marriott(MAR Quote) has earned a buy rating since March 2005. The company's strengths include solid stock price performance, increased net operating cash flow and a low debt-to-equity ratio.

These strengths outweigh the company's subpar net income growth.

Rated a buy since May 2005, Baxter International(BAX Quote) develops, manufactures and distributes products and services used mainly by the health care industry. The company has shown strong revenue growth (particularly in its bioscience product line), strong bottom-line growth with improved profit margins, and a promising outlook for EPS growth going forward.

Risks to the buy rating include any delays in the regulatory approval process, ambivalent market acceptance of its products, or pricing pressure from generic competitors.

Telephone titan AT&T(T Quote) has rung up a buy rating since March 2006. This is based on a number of positive investment measures, including robust revenue growth, net income growth and good cash flow from operations.

The company's growth has been driven by acquisitions. The completion of the BellSouth acquisition will generate higher cash flow, and AT&T expects its wireless segment, which now includes all Cingular and BellSouth businesses, to deliver double-digit earnings growth in 2007.

Risks to the buy rating include stiff competition from wireline and cable operators, merger-related challenges and a decline in return on equity, all of which could restrict the company's growth prospects.

Steel manufacturer and retailer Nucor(NUE Quote) has been rated a buy since March 2005. The company has shown strong financial performance driven by higher volume resulting from improved steel prices and higher steel shipments.

Nucor has shown exceptional shareholder returns due to improved return on equity, steady EPS growth and the recent acquisition of Harris Steel Group, which enhanced its market presence in reinforced steel bars, wire mesh and heavy industrial steel grating.

The principal risk to the rating is presented by any continued steel imports into the U.S. market, which could result in an inventory glut and hurt prices. Any unexpected increase in steel scrap costs could also hurt Nucor's operating margin.