TSC Ratings' Updates: Mattel

Getting downgraded to hold from buy was BT Group (BT Quote). The London-based technology company specializes in providing communications solutions. The primary factors that have impacted our rating are mixed -- some indicating strength and some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

BT's revenue growth trails the industry average of 22.4%. Since the same quarter one year prior, revenue slightly increased by 2.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in EPS.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the diversified telecommunication services industry and the overall market, BT Group's return on equity significantly exceeds that of both the industry average and the S&P 500.

BT's EPS declined by 29.2% year-over-year in the most recent quarter. The company has reported a trend of declining EPS over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BT reported lower earnings of $4.17 a share, vs. $6.61 a share in the prior year. This year, the market expects an improvement in earnings (EPS of $4.58, vs. $4.17).

The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the diversified telecommunication services industry average. The net income has significantly decreased by 35.1% when compared to the same quarter one year ago, falling from $1.2 billion to $790.3 million.

The debt-to-equity ratio is very high at 4.14 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, BT maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.

BT had been rated a buy since Feb. 13, 2007.