TSC Ratings' Updates: Kraft

Aetna has improved earnings per share by 14.1% in the most-recent quarter compared year over year. The company has demonstrated a pattern of positive EPS growth over the past two years, and we feel this trend should continue. During the past fiscal year, Aetna increased its bottom line by earning $3.48 vs. $2.97 in the prior year. This year, the market is forecasting an improvement in earnings ($4 vs. $3.48).

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and of the health care providers and services industry. The net income increased by 6.5% when compared year over year, going from $451.30 million to $480.50 million.

The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.34 is very weak and demonstrates a lack of ability to pay short-term obligations.

Aetna had been rated a hold as of July 15.

We upgraded Ceradyne(CRDN Quote) to buy from hold. The Costa Mesa, Calif.-based firm is a developer of technical ceramic products, powders and components for multiple applications within the U.S. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses and should give investors a better performance opportunity than most stocks we cover.

Ceradyne's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.26, which clearly demonstrates the ability to cover short-term cash needs.