TSC Ratings' Updates: Amgen

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 Monday, Aug. 4.

We upgraded Amgen (AMGN Quote) to buy from hold Monday. The Thousand Oaks, Calif.-based health-care company specializes in human therapeutics. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover.

Despite its growing revenue, the company underperformed as compared with the industry average of 1.4% growth. Since the same quarter one year prior, revenue increased slightly by 1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share, or EPS. Amgen's EPS from the most recent quarter came in slightly below the year-earlier quarter; it has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Amgen increased its bottom line by earning $2.78 a share vs. $2.48 in the prior year. This year, the market expects an improvement in earnings ($4.38 vs. $2.78).