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TheStreet.com Ratings: Stock Upgrades, Downgrades

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

TheStreet.com Ratings has initiated coverage of Argentina's Banco Macro (BMA) with a sell rating. Although earnings per share nearly doubled in the past fiscal year, the company is currently trading at a significant premium to its peers in the commercial banking industry. Banco Macro's price-to-earnings ratio stands at 18.4, compared to the industry average of 15.1. The market is expecting the company's earnings to contract 14.9% in the coming year.

Illumina (ILMN) has been downgraded to a sell from a hold. The company makes tools for genetic analysis. Illumina lost $5.58 a share in the first quarter of fiscal 2007, after breaking even in the same quarter a year ago. TheStreet.com Ratings feels the company is likely to report further losses in the coming year. Illumina's debt-to-equity ratio is higher than the life sciences tools and services industry average. ILMN had been rated a hold since February 2007.

Building materials manufacturer USG (USG) has been upgraded to a hold from a sell. The company earned 45 cents per share in the first quarter of fiscal 2007, after losing $2.44 a share in the same quarter a year ago. TheStreet.com Ratings believes USG is in a largely solid financial position with reasonable debt levels. After a sharp decline in stock price over the past 12 months, the company trades at a discount to others in the building products industry. This could be a positive for future investors. USG had been rated a sell since May 2006.

Mueller Industries (MLI) has been upgraded to a buy from a hold. The company makes copper, brass, plastic and aluminum products. Mueller's revenues increased 10.7% in the first quarter of fiscal 2007 compared with the same quarter a year ago. Net operating cash flow nearly doubled during that same time period. The company's current debt-to-equity ratio of 0.57 suggests there has been a successful management of debt levels. Mueller had been rated a hold since February 2007.

Trucking company Arkansas Best (ABFS) has been downgraded to a hold from a buy. The company's earnings per share fell 17.4% in the first quarter of fiscal 2007 compared with the same quarter a year ago. Revenues have remained basically flat over that same period, declining 0.6%. Arkansas Best's return on equity trails the road and rail industry average. ABFS had been rated a buy since April 2005.

Additional ratings changes are listed in the table below.

TheStreet.com Ratings Stock Upgrades, Downgrades
Company Name Ticker Change New Rating Former Rating
Industrial Enterprises of America IEAM Initiation Sell
Clayton Holdings CLAY Initiation Sell
Global Traffic Network GNET Initiation Sell
Banco Macro BMA Initiation Sell
Cohen & Steers CNS Downgrade Hold Buy
Journal Communications JRN Downgrade Hold Buy
Magma Design Automation LAVA Upgrade Hold Sell
USG USG Upgrade Hold Sell
Sify Ltd SIFY Upgrade Hold Sell
Mothers Work MWRK Upgrade Buy Hold
Mueller Industries MLI Upgrade Buy Hold
LSI LSI Downgrade Hold Buy
Max & Ermas Restaurants MAXE Upgrade Hold Sell
FI/FN HIFN Upgrade Hold Sell
Illumina ILMN Downgrade Sell Hold
Iona Technologies IONA Downgrade Hold Buy
Frontier Financial FTBK Downgrade Hold Buy
Enersis ENI Upgrade Buy Hold
Arkansas Best ABFS Downgrade Hold Buy
Buckeye Technologies BKI Upgrade Buy Hold
Camco Financial CAFI Upgrade Hold Sell
Source: TheStreet.com Ratings

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