TSC Ratings' Upgrades, Downgrades

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 generated on April 17.

JPMorgan (JPM), a financial services company, has been upgraded to buy. At 47% the company's gross profit margin is strong, but it has decreased significantly from last year. For the first quarter, revenue dropped 9.2% to $26.76 billion, and earnings per share fell to 68 cents from $1.34. Net income has decreased to $2.37 billion from $4.79 billion.

For 2008, the market is expecting a 23% contraction in full-year EPS to $3.35. Shares have fallen 10% in the past year, netting the stock a price-to-earnings ratio of 12.12, which makes it cheaper than others in its industry. Looking ahead, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. JPMorgan had been rated hold since March 5.

Knight Transportation (KNX), which transports general commodities, has been upgraded to buy. For the fourth quarter, revenue increased 6.6% year over year to $186.5 million, while earnings per share declined to 16 cents from 23 cents. With no debt to speak of, Knight Transportation has a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Its quick ratio of 1.98 demonstrates an ability to cover short-term liquidity needs.

Return on equity has slightly decreased from the year-ago quarter to 13%, which lags the industry average. This implies a minor weakness in the organization. Gross profit margin is rather low at 21%, and the net profit margin of 7.4% trails that of the industry average. Net operating cash flow has decreased 31% to $32.2 million. Knight Transportation had been rated hold since Dec. 11.

F.N.B. Corp. (FNB), a provider of financial services to customers and small- to medium-sized businesses, has been upgraded to buy. For the fourth quarter, revenue increased 3.1% year over year to $113.5 million, while earnings per share declined by a penny to 28 cents. For 2008, the market is expecting a contraction of 1.7% in full-year EPS to $1.13. Return on equity has improved from the year-ago quarter to 13%. This can be construed as a modest strength in the organization.

The company's gross profit margin is rather high at 57%, but its net profit margin of 15% trails the industry average. Shares have slipped 5.8% in the past year, but with a price-to-earnings ratio of 14.37, the stock is still slightly more expensive than the industry average. F.N.B. Corp. had been rated hold since Jan. 15.

Allied World Assurance (AWH), an insurance and reinsurance company, has been upgraded to hold. Strengths such as notable return on equity, expanding profit margins and good cash flow from operations are countered by a decline in share price during the past year. The company's return on equity significantly exceeds the industry average. At 47%, the gross profit margin is strong and has increased from the year-ago quarter. The net profit margin of 34% significantly outperformed the industry average. For the fourth quarter, earnings per share declined to $2.01 from $2.04.

For 2008, the market is expecting a 2.6% contraction in full-year EPS to $7.33. After a year of fluctuations, the net result is that the share price has not changed very much. With a price-to-earnings ratio of 5.63, the company trades at a significant discount to its sector peers.

However, we believe the attractive valuation does not justify a buy rating at this time. Allied World Assurance had been rated sell since TheStreet.com Ratings initiated coverage on Aug. 15.

FCStone Group (FCSX), a commodity risk management company, has been initiated with a hold rating. Strengths such as a solid stock-price performance, notable return on equity and good cash flow from operations are balanced by poor profit margins. The company's return on equity, at 25%, significantly exceeds the industry average and is above that of the S&P 500. The debt-to-equity ratio is somewhat low at 0.7, implying successful management of debt.

For the second quarter of 2008, revenue plummeted 77% year over year to $92 million, but earnings per share increased to 61 cents from 40 cents. The gross profit margin is lower than desirable at 33%. Powered by its strong earnings growth and other factors, this stock has surged by 25% over the past year, netting it a price-to-earnings ratio of 22.35, which puts it at a premium to others in its sector.

Additional ratings changes from April 17 are listed below.

Ticker	Company Name	Change	New Rating	Former Rating
ADEP	ADEPT TECHNOLOGY INC	Upgrade	Hold	Sell
DEAR	DEARBORN BANCORP INC	Downgrade	Sell	Hold
FNB	F N B CORP/FL	Upgrade	Buy	Hold
BUSE	FIRST BUSEY CORP	Upgrade	Buy	Hold
FCF	FIRST COMMONWLTH FINL CP/PA	Upgrade	Buy	Hold
FFIC	FLUSHING FINANCIAL CORP	Upgrade	Buy	Hold
GNCMA	GENERAL COMMUNICATION	Upgrade	Hold	Sell
JPM	JPMORGAN CHASE & CO	Upgrade	Buy	Hold
KCLI	KANSAS CITY LIFE INS CO	Upgrade	Buy	Hold
KNX	KNIGHT TRANSPORTATION INC	Upgrade	Buy	Hold
SXI	STANDEX INTERNATIONAL CORP	Upgrade	Buy	Hold
AWH	ALLIED WORLD ASSRNC CO HLDGS	Upgrade	Hold	Sell
FCSX	FCSTONE GROUP INC	Initiated	Hold

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