TSC Ratings' Updates: Foster Wheeler

The following ratings changes were generated on Thursday, Oct. 24.

We've downgraded Aflac(AFL Quote), which, through its subsidiaries, engages in the marketing and sale of supplemental health and life insurance in the U.S. and Japan, from buy to hold. Strengths include its largely solid financial position with reasonable debt levels by most measures and notable return on equity. Weaknesses include a decline in the stock price during the past year, deteriorating net income and poor profit margins.

Aflac's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying very successful management of debt levels. The return on equity has improved slightly when compared with the same quarter one year prior, exceeding the industry average and the S&P 500.

Aflac has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago, but we feel it is poised for EPS growth in the coming year. During the past fiscal year, Aflac increased its bottom line by earning $3.31 vs. $2.95 in the prior year. This year, the market expects an improvement in earnings to $3.98. Net income decreased by 76.2% from the same quarter one year ago, underperforming the S&P 500 and the insurance industry. Gross profit margin is extremely low, at 4.2%, and net profit margin of 2.7% trails the industry average.

We've downgraded Coach(COH Quote), which engages in the design and marketing of accessories and gifts for men and women, from hold to sell, based on the generally disappointing historical performance in its stock. Shares are down by 47.85%, underperforming the the S&P 500. The decline may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.