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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 60 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.

Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.

Leading the list today is Praxair(PX - Cramer's Take - Stockpickr), which produces, sells and distributes industrial gases. It has been rated a buy since August 2005. The buy rating is supported by the company's robust revenue growth, expanding profit margins, increased net income and notable return on equity. Revenue growth in North America was driven by higher pricing and increased sales volume; European revenue grew as a result of favorable currency effects and volume growth; and revenue in South America increased from new business and plant start-ups.

Risks to the company's performance include any inability to derive synergies from the acquisition of Mills Welding & Specialty Gases, failure to drive growth from new capacity additions, or unfavorable effects of currency fluctuations.

Investment management firm T. Rowe Price(TROW - Cramer's Take - Stockpickr) has been rated a buy since July 2005. Assets under management reached a record $379.8 billion at the end of the second quarter 2007, up from $293.70 billion a year earlier.

T. Rowe Price used available cash to repurchase nearly 1.6 million shares during the second quarter, and had 16.64 million common shares remaining under its current repurchase authorization. It has an attractive record of dividend return, having increased its payout every year since becoming a public company in 1986.

Any unexpected downturn in the securities markets and the economy in general, any deterioration in the relative investment performance of its products, or any adverse regulatory developments could pose a risk to the buy rating.

Cummins(CMI - Cramer's Take - Stockpickr), which designs, manufactures, distributes and repairs diesel and natural gas engines and electric power generation systems, has been rated a buy since August 2005. The company shows steady revenue and EPS growth. Earnings are expected to continue to grow, driven in part by its emissions solutions and turbocharger businesses.

The stock is not without risk. Cummins' performance depends on the economic conditions of various competitive geographical markets, particularly in the automotive, construction and general industrial sectors. Going forward, a decline in margins as well as return on equity could restrain the company's growth.

Global integrated energy company Chevron(CVX - Cramer's Take - Stockpickr) has been rated a buy since May 2005. The company's earnings increased by 23.6% in the second quarter of 2007 compared with the same period last year, driven by strong performance from both its upstream and downstream segments.

During the first quarter, Chevron declared a dividend of 58 cents per share, an increase of 11.5%, and repurchased $1.75 billion of its common shares. Additionally, the company announced the sale of its fuels marketing businesses in Belgium, the Netherlands and Luxembourg, and completed the sale of its holdings of Dynergy common stock.

Risks to the buy rating depend on the future movement of crude oil and natural gas prices, as well as the efficiency in production from new discoveries.

CSX(CSX - Cramer's Take - Stockpickr) owns one of the largest rail networks in the U.S. It has been rated a buy since July 2005. The buy rating is based on the company's improving margins and shareholder returns, low debt levels and solid product pricing. Its revenue increased by 4.5% in the second quarter over the year-earlier period, and it has repurchased common stock worth $548 million as part of its $3 billion share repurchase plan. CSX also announced a 25% increase in its quarterly dividend. The company's strengths outweigh its subpar net income growth.