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TSC Ratings' Updates: Southwest Airlines

In comparison to the other companies in the Paper & Forest Products industry and the overall market, the firm's return on equity significantly exceeds that of the industry average and is above that of the S&P 500. Pope Resources' stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.82%, which is also worse than the performance of the S&P 500.

Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper than most other stocks in its industry. But due to other concerns, we think the stock is still not a good buy right now. Pope had been rated a buy since July 21, 2006.

Legacy Reserves (LGCY), which engages in the acquisition and development of oil and natural gas properties principally in the Permian Basin and Mid-continent regions of the United States, was initiated with a hold.

Legacy Reserves' strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and generally poor debt management. Net operating cash flow has significantly increased to $29.26 million when compared with the same quarter last year, growing by 1,161.37%. In addition, the company has also vastly surpassed the industry average cash flow growth rate of 36.17%.

When compared with other companies in the oil, gas & consumable fuels industry and the overall market, Legacy Reserves' return on equity significantly trails that of both the industry average and the S&P 500. The firm's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that LGCY's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.58 is low and demonstrates weak liquidity. Its net income has fallen drastically by 343.5% when compared with the same quarter one year ago, falling to a loss of $21.10 million from a loss of $4.76 million -- significantly underperforming the S&P 500 and the oil, gas & consumable fuels industry.

Additional ratings changes from July 24 are listed below.

Ticker Company Name Change New Rating Former Rating
ABFS ARKANSAS BEST CORP Upgrade Buy Hold
AMIN AMERICAN INTERNATIONAL INDS Downgrade Sell Hold
ATB ARLINGTON TANKERS LTD Upgrade Buy Hold
CLRO CLEARONE COMMUNICATIONS INC Downgrade Hold Buy
COCO CORINTHIAN COLLEGES INC Upgrade Buy Hold
CPII CPI INTERNATIONAL INC Upgrade Hold Sell
CTL CENTURYTEL INC Upgrade Buy Hold
HELE HELEN OF TROY LTD Upgrade Buy Hold
KYCN KEYSTONE CONS INDUSTRIES INC Upgrade Hold Sell
LGCY LEGACY RESERVES LP Initiated Hold
LUV SOUTHWEST AIRLINES Upgrade Buy Hold
MRH MONTPELIER RE HOLDINGS Upgrade Hold Sell
NYB NEW YORK CMNTY BANCORP INC Downgrade Hold Buy
POPE POPE RESOURCES/DE -LP Downgrade Hold Buy
STM STMICROELECTRONICS NV Upgrade Hold Sell
TYC TYCO INTERNATIONAL LTD Downgrade Sell Hold
WIRE ENCORE WIRE CORP Downgrade Hold Buy

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