Stock Upgrades, Downgrades from TheStreet.com Ratings

Each business day, 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 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 were made on Feb. 14.

Performance Food (PFGC Quote), a food distributor, has been upgraded to buy. The company's strengths, which include solid stock price performance and reasonable valuation levels, outweigh low profit margins.

Fueled by strong earnings growth, the stock's rise over the past year has outperformed the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential. For the third quarter of 2007, Performance Food posted year-over-year EPS growth of 31%. Net income rose $12.04 million to $16.04 million during the same period. With a price-to-earnings ratio (P/E) of 22.93, the stock is cheaper than others in its industry. Performance Food had been rated hold since Aug. 6.

Lear (LEA Quote), a maker of car parts, has been upgraded to hold. The company exhibits impressive EPS and revenue growth as well as notable return on equity. However, Lear shows poor debt management, weak profit margins and a disappointing stock price performance.

For the fourth quarter, the company announced a profit of $27 million, or 34 cents a share, vs. a loss of $645 million, or $8.90 a share in 2006. We expect a trend of EPS growth to continue. Return on equity greatly increased year over year and exceeds the industry average, a signal of significant strength within the corporation.

Lear's gross profit margin is currently extremely low, coming in at 8.4%. Its net profit margin of 0.7% trails the industry average. Lear's debt-to-equity ratio is very high at 2.25, implying poor management of debt levels. The company maintains a poor quick ratio of 0.76, which illustrates the inability to avoid short-term cash problems. Lear had been rated sell since Jan. 15.

Great Plains (GXP Quote), an energy company, has been downgraded to hold. The company's strengths include robust revenue growth, growth in earnings per share and compelling growth in net income. Weaknesses include disappointing stock performance. In the fourth quarter, Great Plains posted 23% year-over-year revenue growth. This revenue increase contributed to profit of $48.1 million, or 56 cents a share, vs. $37 million, or 45 cents a share a year ago. We feel that EPS growth should continue. GXP has underperformed the S&P 500 Index, declining 15% over the past year. Such a decline is not necessarily a negative; it could make the stock attractive down the road. Right now, however, it is too soon to buy.

Cousins Properties (CUZ Quote), a real estate investment trust, has been downgraded to sell. The company shows deteriorating net income, weak debt management, disappointing return on equity, poor profit margins and unsatisfying stock price performance.