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TSC Ratings' Upgrades, Downgrades

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 were generated on April 21.

Cypress Semiconductor (CY - Get Report), a which offers high-performance, mixed-signal, programmable solutions, has been upgraded to buy. For the first quarter, revenue increased 29% year over year to $442.1 million, while earnings per share declined to a loss of 12 cents from a loss of a penny in the same period.

Return on equity greatly increased to 26% from 3.1% a year ago and now exceeds the industry average. The company's debt-to-equity ratio of 0.70 is somewhat low overall but exceeds the industry average, suggesting that the management of the debt levels should be evaluated further. This is a signal of significant strength within the corporation.

Shares have climbed 34% in the past year. The stock has a price-to-earnings ratio (P/E) of 11.90, which makes it cheaper than others in its industry. We feel the stock should continue to move higher despite its recent gains. Cypress Semiconductor had been rated hold since Jan. 28.

China Unicom (CHU - Get Report), a telecommunications company operating in China, has been upgraded to buy. For the fourth quarter, the company swung to a profit of $592.7 million from a loss of $51.8 million a year ago. Revenue rose 17% year over year to $3.75 billion, and EPS swung to a 44-cent profit from a loss of 4 cents. Net operating cash flow has increased 2.6% to $1.14 billion from the year-ago quarter.

The company also exceeds the industry average cash flow growth rate of 0.9%. Its gross profit margin is rather high at 68%, but the net profit margin of 16% trails the industry average. Shares have surged 40% in the past year. We feel the stock should continue to move higher despite its recent gains. With a P/E of 22.77, the stock is cheaper than others in its sector. China Unicom had been rated hold since Sept. 17.

Dover Corp. (DOV - Get Report), which makes industrial products and components, has been upgraded to buy. For the fourth quarter, earnings per share improved 15% year over year to 86 cents. The company has demonstrated a pattern of EPS growth over the past two years, and we feel that this trend should continue.

For 2008, the market expects an improvement in full-year EPS to $3.55 from $3.22 in 2007. Revenue has increased 11% year over year to $1.86 billion. The company's debt-to-equity ratio, 0.53, is below the industry average, implying that there has been successful management of debt levels. In addition, a quick ratio of 1.01 illustrates an ability to avoid short-term cash problems. Dover Corp. had been rated hold since Jan. 28.

Xerox (XRX - Get Report), which provides document equipment, software, solutions and services, has been downgraded to hold. Strengths such as revenue growth and expanding profit margins are countered by a disappointing stock-price performance, deteriorating net income and disappointing return on equity.

For the first quarter, revenue rose 13% year over year to $4.34 billion, while EPS swung to a loss of 27 cents from a profit of 24 cents. For 2008, the market expects an improvement in full-year EPS to $1.30 from $1.20 in 2007. At 44%, the company's gross profit margin is strong. However, a negative net profit margin of 5.6% significantly underperforms the industry average. Net operating cash flow has decreased 72% to $52 million from the year-ago quarter and trails the industry average.

Shares are down 20% in the past year. Despite the decline, the stock has a P/E of 21.12, which puts it at a premium to others in its industry. Xerox had been rated buy since Ratings initiated coverage on April 18, 2006.

Empresas ICA (ICA - Get Report), an engineering, procurement and construction company operating in Mexico, has been downgraded to hold. A solid stock-price performance, revenue growth and a solid financial position are weighed down by deteriorating net income, disappointing return on equity and poor profit margins.

For the fourth quarter, revenue rose 10% to $649.9 million, while earnings per share swung to a loss of $1.04 from a profit of 28 cents. The company's debt-to-equity ratio of 0.53 is higher than the industry average. However, its quick ratio of 1.69 demonstrates strong liquidity. Gross profit margin is rather low at 17%, and a negative 16% net profit margin significantly trails the industry average. Shares have climbed 56% in the past year. We do not recommend additional investment in this stock, despite its gains in the past year. Empresas ICA had been rated hold since Oct. 1.

Additional ratings changes from April 21 are listed below.

Ticker Company Name Change New Rating Former Rating
RNT Aaron Rents Upgrade Buy Hold
APOG Apogee Enterprises Upgrade Buy Hold
AVA Avista Upgrade Buy Hold
CHU China Unicom Upgrade Buy Hold
CRN Cornell Companies Upgrade Buy Hold
CY Cypress Semiconductor Upgrade Buy Hold
DOV Dover Upgrade Buy Hold
ICA Empresas ICA Downgrade Hold Buy
HDSN Hudson Technologies Upgrade Hold Sell
KEG Key Energy Services Upgrade Buy Hold
MLI Mueller Industries Upgrade Buy Hold
NUS Nu Skin Enterprises Upgrade Buy Hold
SYMS Syms Downgrade Sell Hold
XRX Xerox Downgrade Hold Buy
LBAI Lakeland Bancorp Upgrade Buy Hold
PNX Phoenix Companies Upgrade Buy Hold
SWIR Sierra Wireless Upgrade Buy Hold
CIG CIA Energetica de Minas Downgrade Hold Buy
BBNK Bridge Capital Holdings Downgrade Hold Buy
EBTC Enterprise Bancorp Upgrade Buy Hold
TLP Transmontaigne Partners Upgrade Buy Hold
SWSI Superior Well Services Upgrade Buy Hold
This article was written by a staff member of Ratings.

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AVA $40.58 -0.05%
CHU $11.48 -1.30%
CY $9.44 -1.50%
DOV $64.75 -1.10%
ICA $0.81 -2.20%


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