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TheStreet.com Ratings: Stock Upgrades, Downgrades

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

While the 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 forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

Some recent rating changes are highlighted below.

Casual dining restaurant chain Texas Roadhouse (TXRH) has been upgraded to buy from hold. The company's revenue grew by 29.7% in the fourth quarter of fiscal 2006 compared with the same quarter a year earlier. These results seem to have trickled down to the bottom line, resulting in an 11.1% increase in earnings per share during that same time period. Texas Roadhouse had been rated a hold since July 2006.

Friendly Ice Cream (FRN) has been upgraded to hold from sell. The company operates restaurants and sells ice cream dessert products. Friendly managed to earn 1 cent per share in the fourth quarter of 2006. That's a significant improvement from the same quarter a year ago, when the company lost $3.80 per share. TheStreet.com Ratings expects earnings to grow in the future at a rate that exceeds the hotels, restaurant and leisure industry average. FRN had been rated a sell since March 2006.

Liquid crystal display panel manufacturer LG Philips LCD (LPL) has been upgraded to hold from sell. The company's net operating cash flow shot up 38.3% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. Although LG Phillips LCD has reported a trend of declining earnings per share over the past two years, TheStreet.com Ratings expects this trend to reverse in the coming 12 months. LPL had been rated a sell since October 2006.

Japan-based NEC (NIPNY) has been upgraded to hold from sell. The company provides information technology and networking solutions to business and government clients. NEC's revenue and gross profit margin rose in the third quarter of fiscal 2006 compared with the same quarter a year ago. This year, the market is expecting an improvement in earnings. NEC had been rated a sell since December 2006.

American Real Estate Partners (ACP) has been downgraded to hold from buy. The company owns and operates gaming properties, resorts, golf courses and rental developments in various areas of the U.S.. Net operating cash flow fell 66.7% in the fourth quarter of fiscal 2006 compared with the same quarter a year ago. The stock price has jumped 149.6% over the past 12 months, and TheStreet.com Ratings feels the company has now reached a valuation level where it is relatively expensive compared with its competitors. American Real Estate Partners had been rated a buy 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
Texas Roadhouse TXRH Upgrade Buy Hold
Lincoln Educational Svcs LINC Upgrade Hold Sell
LG Philips LCD LPL Upgrade Hold Sell
Standard Microsystems SMSC Upgrade Buy Hold
Sten STEN Downgrade Sell Hold
NEC NIPNY Upgrade Hold Sell
Friendly Ice Cream FRN Upgrade Hold Sell
SCBT Financial SCBT Downgrade Hold Buy
American Real Estate Partners ACP Downgrade Hold Buy
Source: TheStreet.com Ratings

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