TSC Ratings' Upgrades, Downgrades: Campbell

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 June 9.

Hexcel (HXL), which develops advanced composites for use in the commercial aerospace, defense and industrial markets, has been upgraded to buy. For the first quarter, revenue increased 22% year over year to $344.5 million, and earnings per share climbed to 24 cents from 15 cents. For 2008, the market expects an improvement in full-year EPS to 95 cents from 65 cents in 2007. The company's debt-to-equity ratio of 0.79 is somewhat low overall, but exceeds the industry average. However, its quick ratio of 1.10 is sturdy. Shares have not marked a net change in price in the past year. The stock trades with a price-to-earnings ratio of 31.91, which places it at a premium to others in its industry. However, we feel other strengths outweigh the pricey valuation. Hexcel had been rated hold since Oct. 23.

Cascade Corp. (CAE), which together with its subsidiaries makes load-engagement devices and replacement parts, has been upgraded to buy. For the first quarter, revenue increased 11% year over year to $149.9 million, while earnings per share declined to 98 cents from $1.90. For 2008, the market is expecting a contraction in full-year EPS to $4.00 from $4.85 in 2007. The company's debt-to-equity ratio, 0.39, is low, implying successful management of debt levels. Its quick ratio of 1.69 demonstrates an ability to cover short-term liquidity needs. Return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. With a price-to-earnings ratio of 11.26, the stock trades at a discount to others in its sector. Cascade Corp. had been rated hold since Dec. 13.

PG&E Corp. (PCG), which through its subsidiaries operates as a public utility company, has been upgraded to buy. For the first quarter, revenue climbed 11% year over year to $3.73 billion, and earnings per share declined to 60 cents from 69 cents. For 2008, the market expects an improvement in full-year EPS to $2.95 from $2.71 in 2007. Net operating cash flow has slightly increased to $1.03 billion. The company's debt-to-equity ratio is 1.16, but is still below the industry average. Its quick ratio of 0.65 is low and demonstrates weak liquidity. PG&E Corp. had been rated hold since Feb. 25.

OSI Pharmaceuticals (OSIP), a biotech firm, has been upgraded to buy. For the first quarter, revenue increased 17% year over year to $90.7 million, and earnings per share climbed to 52 cents from 33 cents. For 2008, the market expects an improvement in full-year EPS to $2.12 from $1.69 in 2007. The current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. With a price-to-earnings ratio of 21.25, the stock trades at a discount to its sector peers. OSI Pharmaceuticals had been rated hold since March 24.

Campbell Soup (CPB), which makes convenience food products, has been downgraded to hold. Strengths such as compelling growth in net income, improving revenue and expanding profit margins are balanced by a disappointing stock-price performance, poor debt management and weak operating cash flow. For the third quarter of fiscal 2008, revenue grew 7.4% year over year to $1.88 billion, while earnings per share declined to 14 cents from 53 cents. For 2008, the market expects an improvement in full-year EPS to $2.05 from $1.98 in 2007. The company's debt-to-equity ratio of 1.12 is relatively high, suggesting a need for better debt level management. Its quick ratio of 0.42 demonstrates an inability to cover short-term cash needs. Campbell Soup had been rated buy since TheStreet.com Ratings initiated coverage on June 6, 2006.

Additional ratings changes from June 9 are listed below.

Ticker	Company Name	Change	New Rating	Former Rating
AEHR	Aehr Test Systems	Upgrade	Buy	Hold
BWINB	Baldwin & Lyons	Downgrade	Hold	Buy
CAE	Cascade Corp.	Upgrade	Buy	Hold
CPB	Campbell Soup	Downgrade	Hold	Buy
EGMI	Electronic Game Network	Upgrade	Hold	Sell
FFIV	F5 Networks	Upgrade	Buy	Hold
HXL	Hexcel	Upgrade	Buy	Hold
KCAP	Kohlberg Capital	Initiated	Hold
KCLI	Kansas City Life Insurance	Downgrade	Hold	Buy
MVE	Smart Move	Initiated	Sell
NU	Northeast Utilities	Downgrade	Hold	Buy
OSIP	OSI Pharmaceuticals	Upgrade	Buy	Hold
PCG	PG&E Corp.	Upgrade	Buy	Hold
RSC	Rex Stores	Downgrade	Hold	Buy
TFCO	Tufco Tech	Upgrade	Buy	Hold
UFS	Domtar Corp.	Initiated	Sell
WSBC	Wesbanco	Downgrade	Hold	Buy

This article was written by a staff member of TheStreet.com Ratings.