The following ratings changes were generated on Monday, Oct. 13.
We've downgraded Target (TGT - Get Report), which operates large-format general merchandise discount stores in the U.S. and a much smaller, rapidly growing online business, from buy to hold. company's Weaknesses include generally poor debt management, poor profit margins and a generally disappointing performance in the stock itself.
Since the same quarter one year prior, revenues slightly increased by 5.8%, slightly outpacing the industry average of 4.6% and boosting EPS. Target's return on equity has also improved s lightly on the year, outperforming the multiline retail industry and the S&P 500. EPS improved from $3.21 to $3.34, and the market expects further improvement to $3.36 this year.
Target's gross profit margin is currently lower than desirable, at 33.4%, a decrease from the same quarter last year. However, at 4.1%, net profit margin is higher than the industry average. The debt-to-equity ratio of 1.46 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, Target maintains a poor quick ratio of 0.84, which illustrates the inability to avoid short-term cash problems.We're downgraded Pride International (PDE), which provides contract drilling and related services, from buy to hold. Strengths include its impressive record of earnings per share growth,compelling growth in net income and revenue growth. Weaknesses include weak operating cash flow and a generally disappointing performance in the stock itself. EPS improved by 27.9% in the most recent quarter compared with the same quarter a year ago, continuing a two-year pattern of EPS growth and suggesting an improvement in business performance. Pride earned $2.45 this year, compared with $1.11 in the prior year, and the market expects earnings of $3.65 this year. Pride's net income growth of 24.8%, from $146.1 million to $187.6 million, exceeds that of the S&P 500 and the energy equipment and services industry average. ROE has improved slightly year over year, outperforming the S&P 500 but underperforming the industry average.