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Stock Upgrades, Downgrades From TheStreet.com Ratings

TheStreet.com Ratings Staff

Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

The following ratings changes were generated on March 19.

Diana Shipping (DSX Quote - Cramer on DSX - Stock Picks), a dry bulk shipper, has been upgraded to buy. For the fourth quarter, revenue leaped 67% year over year to $58.9 million, and earnings per share improved to 49 cents from 37 cents. For 2008, the market expects an improvement in full-year EPS to $2.87 from $2.08 in 2007. The company's debt-to-equity ratio is very low at 0.12. Shares have surged 32% in the past year. Despite the increase, Diana Shipping maintains a price-to-earnings ratio of 12.13, making it cheaper than others in its industry. The stock had been rated hold since Feb. 19. Amdocs (DOX Quote - Cramer on DOX - Stock Picks), which provides software and services to the communication service industry, has been downgraded to hold. Strengths such as revenue growth, a largely solid financial position and reasonable valuation levels are countered by disappointing return on equity, weak operating cash flow and a declining stock-price performance. For the first quarter, revenue increased 7.4% year over year to $742.3 million and earnings per share increased to 44 cents from 42 cents. Amdocs' debt-to-equity ratio of 0.17 is very low, but exceeds the industry average. Its quick ratio of 2.11 demonstrates an ability to cover short-term liquidity needs. The company has a gross profit margin of 40%, which we consider strong, but its net profit margin of 13% significantly trails the industry average. Net operating cash flow has declined marginally to $93.15 million from the year-ago quarter. Amdocs had been rated buy since TheStreet.com Ratings initiated coverage on March 17, 2006.

Centurytel (CTL Quote - Cramer on CTL - Stock Picks), an integrated communications company, has been downgraded to hold. An increase in net income, revenue growth and an attractive valuation are balanced by a disappointing stock-price performance and poor debt management. For the fourth quarter, net income increased 59% year over year to $323.1 million, and revenue grew 8% to $656.6 million. Net operating cash flow increased 10% to $240.6 million.

The stock has underperformed the S&P 500 Index, declining 22% in the past year. This decline nets it a price-over-earnings ratio of 9.13, which is cheaper than the industry average. This valuation, however, does not justify a buy rating at this time. The company's quick ratio of 0.35 is very low and demonstrates very weak liquidity. Centurytel had been rated buy since TheStreet.com Ratings initiated coverage on March 17, 2006.

Quest Diagnostics (DGX Quote - Cramer on DGX - Stock Picks), a diagnostics company, has been downgraded to hold. Quest posted a loss of $5.3 million in the fourth quarter, vs. a profit of $149.3 million a year ago. Excluding the loss from discontinued operations, net income increased 3.2% year over year.

The whole health care industry is undergoing increasing medical cost pressure resulting from longer life spans and a greater prevalence of chronic illnesses. This leads to increased demand for treatment of ongoing illnesses and long-term services. Advancements in medical technology and increased spending have also added to costs.

Changing funding levels and rate cuts from the government to control medical costs are putting pressure on the company's revenue growth. The company expects to reduce annual operating costs by $500 million by 2009. These initiatives should help the company in achieving its long-term goals of revenue growth and expanding its international business. Quest Diagnostics had been rated buy since TheStreet.com Ratings initiated coverage on March 17, 2006.

URS Corp. (URS Quote - Cramer on URS - Stock Picks), which provides engineering, construction and technical services, has been downgraded to hold. Strengths such as robust revenue growth, reasonable valuation levels and good cash flow from operations are countered by disappointing return on equity, a disappointing stock-price performance and feeble EPS growth. For the fourth quarter, revenues leaped 59% year over year to $1.73 billion, but EPS declined to 39 cents from 51 cents. The company's low debt-to-equity ratio of 0.38, is nonetheless higher than the industry average. Its quick ratio of 1.33 is sturdy.

Shares have declined 19% in the past year, netting the stock a P/E of 14.10. However, its cheap valuation relative to the industry average is not enough to justify a buy rating. URS had been rated buy since TheStreet.com Ratings initiated coverage on March 17, 2006.

Additional ratings changes are listed below.