TSC Ratings' Updates: City National

The company reported a debt-to-equity ratio is 0.25 as of the end of first quarter fiscal year 2008. The company projects its capital expenditure budget for the full year 2008 to be $1.30 billion. In addition, BHI has $1.03 billion of cash and equivalents balance. This together with a reasonable debt-to-equity ratio provides the financial flexibility to fund new projects and enhance value for its shareholders.

Oil's price has been in an uptrend in the past two years, and it is currently trading at very high level. This could lead to either a decline in demand or increased use of alternatives, which in turn will slowdown drilling activity. This may affect the performance of the company. Furthermore, the slowdown in the U.S economy and more job cuts could have an adverse impact on the oil industry.

Baker Hughes' performance could be affected by uncertainty in North America activity as the growth rate in drilling activity has slowed and natural gas inventories continue to build. Additionally, the company faces challenges from declining margins, which may restrict future earnings potential.

BHI had been rated a buy since Oct. 3, 2008.

Aracruz Celulose S.A.(ARA Quote) has been downgraded from buy to hold. Aracruz Celulose S.A. engages in the production and sale of bleached hardwood kraft market pulp primarily in Brazil. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels.

However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, weak operating cash flow and a generally disappointing performance in the stock itself.

The revenue growth came in higher than the industry average of 10.6%. Since the same quarter one year prior, revenue has slightly increased by 8.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, as displayed by a decline in earnings per share.

The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.62, which clearly demonstrates the ability to cover short-term cash needs.

44.60% is the gross profit margin for ARA which we consider to be strong. Regardless of ARA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ARA's net profit margin of 13.20% significantly outperformed against the industry.

Net operating cash flow has decreased to $126.12 million or 34.24% when compared with the same quarter last year. In addition, when comparing it with the cash generation rate to the industry average, the firm's growth is significantly lower.

ARA's earnings per share declined by 43.0% in the most-recent quarter compared with the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, reported lower earnings of $7.84 vs. $8.46 in the prior year. For the next year, the market is expecting a contraction of 54.4% in earnings ($3.58 vs. $7.84).

ARA had been rated a hold since Oct. 3, 2006.

The remaining ratings' changes generated on October 6 are listed below.

Ticker	Company	Current	Change	Previous
AMAC	American Medical Alert Corp	HOLD	Downgrade	BUY
ARA	Aracruz Celulose	HOLD	Downgrade	BUY
ASMI	ASM International	HOLD	Downgrade	BUY
BHI	Baker Hughes	HOLD	Downgrade	BUY
CAE	Cascade Corp.	HOLD	Downgrade	BUY
CETV	Central European Media	HOLD	Downgrade	BUY
CLUB	Town Sports International Holdings	SELL	Downgrade	HOLD
COVR	Cover-All Technologies Inc.	HOLD	Upgrade	SELL
CSIQ	Canadian Solar	SELL	Downgrade	HOLD
CSL	Carlisle Companies	HOLD	Downgrade	BUY
CVC	Cablevision Systems	SELL	Downgrade	HOLD
CYN	City National	BUY	Upgrade	HOLD
ETN	Eaton Corp	HOLD	Downgrade	BUY
FSNM	First State Bancorp	SELL	Downgrade	HOLD
HAYN	Haynes International	HOLD	Downgrade	BUY
HXL	Hexcel Corp	HOLD	Downgrade	BUY
ITP	Intertape Polymer Group	HOLD	Upgrade	SELL
MANH	Manhattan Associates	HOLD	Downgrade	BUY
OCNF	OceanFreight	SELL	Initiated	-
ORA	Ormat Technologies	HOLD	Downgrade	BUY
OSG	Overseas Shipholding	HOLD	Downgrade	BUY
PWVI	PowerVerde Inc.	FROZEN	Downgrade	HOLD
RDS.A	Royal Dutch Shell	HOLD	Downgrade	BUY
RNST	Renasant Corp.	BUY	Upgrade	HOLD
SCHS	School Specialty Inc.	HOLD	Downgrade	BUY
SLW	Silver Wheaton	HOLD	Downgrade	BUY
SMHG	Sanders Morris Harris Group	HOLD	Downgrade	BUY
SNG	Canadian Superior Energy	SELL	Downgrade	HOLD
TBI	TrueBlue	HOLD	Downgrade	BUY
UDRL	Union Drilling	SELL	Downgrade	HOLD
ULTI	Ultimate Software Group	HOLD	Downgrade	BUY

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.