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Stock Upgrades, Downgrades From Ratings

Each business day, 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 are from Feb. 12.

Moody's (MCO), a credit ratings company, has been downgraded to sell on poor fourth-quarter 2007 earnings.

For the quarter, total revenue fell 14% to $504.9 million year over year as demand for bond and securities ratings lagged due to credit-market weakness and a rise in subprime defaults. Over the same period, net income declined 54% to $127.3 million.

Moody's expects the challenging market condition to continue to affect its financial performance. It forecasts a low-double-digit revenue decline. Earnings per share are likewise expected to decrease 13% to 16% from fiscal 2007 to a range of $2.17 to $2.25.

Ratings agencies, including Moody's, are accused of abetting the subprime crisis by providing overly optimistic ratings for packages of subprime mortgages and failing to quickly downgrade these bonds. This investigation could result in a substantial financial liability.

To improve its condition, Moody's has initiated a business restructuring strategy and has made acquisitions. This, coupled with improvement in the economy and the debt market, could improve the company's financial performance. Moody's had been rated hold since May 7.

NutriSystem (NTRI), a weight management and fitness products company, has been downgraded to hold. Weaknesses include short-term competitive pressure and the impact of weak economic conditions on new customer growth. However, the company should benefit from its growth initiatives and ample market opportunity.

Demand for NutriSystem's products has waned thanks to a new over-the-counter weight loss pill, GlaxoSmithKline's (GSK) Alli. New customer growth declined 7.2% in the third quarter of 2007, and the company expects the figure to fall 20% in the fourth quarter. Further, a weak economy could curb customer spending on the $10-per-day diet program.

Though revenue increased 21% year over year to $188.3 million, net income declined 4.9%. NutriSystem continued to invest in its Web site to aid customer retention and launched the NutriSystem Advanced program, which it believes will help revenue. U.S spending on diet products and programs is expected to reach $61 billion by 2008, up from $47 billion in 2004. We believe that the company faces growth opportunities in this market. NutriSystem had been rated buy since Ratings initiated coverage on Feb. 10, 2006.

Amerco (UHAL), which supplies moving and storage products and services through its subsidiary, U-Haul, has been downgraded to hold. The stock has not performed well, and earnings per share has failed to show robust improvement.

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