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Stock Upgrades, Downgrades From Ratings

The McGraw-Hill Companies (MHP) sells information services and products to the education, financial services and business information markets worldwide. It has been downgraded to hold from buy.

The company's third-quarter revenue increased 9.8% compared with the same period last year, exceeding the industry average of 8.0%. McGraw-Hill's earnings rose 26.4% to $1.34 per share from $1.06 a share over the same time frame. This continued a two-year pattern of EPS growth, a trend Ratings believes will continue.

The company's debt-to-equity ratio is somewhat low at 0.77, and less than the industry average, implying that there has been a relatively successful effort in the management of debt levels. Still, its quick ratio of 0.50 is very weak and demonstrates a lack of ability to pay short-term obligations. Investors have so far failed to pay attention to McGraw-Hill's earnings improvements, as its stock price has fallen by 35.6% in the last 12 months. While it is now cheaper (in proportion to its earnings over the past year) than most other stocks in its industry, we do not feel the stock is a good buy right now because of other concerns. McGraw-Hill had been rated a buy since December 2005.

Marriott International (MAR) operates and franchises hotels and related lodging facilities worldwide. It has been downgraded to hold from buy.

The company's third-quarter revenue rose 12.5% compared with the same period last year, exceeding the industry average of 0.7%. Marriott's return on equity improved to 44.82% in the quarter compared with 27.17% in the same period last year. This is a sign of significant strength within the organization. However, the company has reported somewhat volatile earnings recently, and third-quarter EPS remained at 33 cents a share, unchanged from the same period last year. Ratings feels it is poised for earnings growth in the coming year. As a counter to these strengths, the company's weaknesses include generally poor debt management, poor profit margins and weak operating cash flow. Marriott's stock price has fallen by 28.38% in the past 12 months, and the hold rating indicates that we do not recommend additional investment at this time. Marriott had been rated a buy since December 2005.

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