TheStreet.com Ratings: Stock Upgrades, Downgrades

Each weekday, TheStreet.com Ratings updates its ratings on the stocks we cover. Our model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Our buy, hold or sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

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

Some recent rating changes are highlighted below.

TheStreet.com Ratings has initiated coverage of Energy Transfer Equity (ETE Quote) with a sell rating. The company transports and stores natural gas and is involved in the retail sale of propane. Net income has fallen over the past year, and earnings per share have also declined. The gross profit margin is extremely low, just 12% in the first quarter of the 2007 fiscal year.

Coverage of managed care provider Healthspring (HS Quote) has also been initiated with a sell rating. TheStreet.com Ratings feels that poor profit margins are the most pressing problem with this company -- gross profit margins were just over 24% in the fourth quarter of fiscal year 2006.

Propane provider Inergy (NRGY Quote) has been upgraded to buy from hold. Inergy's net income has been growing faster than the industry average. TheStreet.com Ratings believes the company is poised for earnings-per-share growth in the coming year. The company had been rated a hold since August 2006.

Machinery firm ESCO Technologies (ESE Quote) has been downgraded to a hold from a buy. The company makes communication and filtration devices for utilities as well as for health-care and transportation providers. In spite of growing revenue, net income has begun to deteriorate, and stock performance has been disappointing. ESCO had been rated a buy since November 2006.

Long-term care provider Advocat (AVCA Quote) has been upgraded to buy from hold. The company offers a return on equity that exceeds the industry average. The stock price has jumped 51% over the past year, and TheStreet.com Ratings feels it should go higher. Advocat had been rated a hold since August 2006.

Additional ratings changes are listed in the table below.

TheStreet.com Ratings Stock Upgrades, Downgrades
Company Name	Ticker	Change	New Rating	Former Rating
Energy Transfer Equity	ETE	Initiation	Sell	n/a
Healthspring	HS	Initiated	Sell	n/a
Cardica	CRDC	Initiated	Sell	n/a
Smart Modular Technologies	SMOD	Initiated	Hold	n/a
Linktone	LTON	Upgrade	Hold	Sell
Affirmative INS Holdings	AFFM	Downgrade	Hold	Buy
First Clover Leaf Financial	FCLF	Upgrade	Buy	Hold
Inergy	NRGY	Upgrade	Buy	Hold
TB Wood's	TBWC	Upgrade	Buy	Hold
SMF Energy	FUEL	Downgrade	Sell	Hold
Petroquest Energy	PQ	Downgrade	Hold	Buy
Esco Technologies	ESE	Downgrade	Hold	Buy
Esterline Technlogies	ESL	Downgrade	Hold	Buy
Advocat	AVCA	Upgrade	Buy	Hold
Bluegreen	BXG	Downgrade	Hold	Buy
CDI	CDI	Upgrade	Buy	Hold
Source: TheStreet.com