TSC Ratings' Updates: Microsoft

Revenue is up 17.5% since the same quarter a year ago, outpacing the industry average of 10.4% growth and boosting EPS, which are up 7.8%. In fact, the company has demonstrated positive EPS growth over the past two years, a trend we feel should continue. During the past fiscal year, Danaher earned $3.71, vs. $3.44 in the prior year, and this year the market expects further improvement to $4.33. The company's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying very successful management of debt levels. Its quick ratio of 0.79 is somewhat weak and could be cause for future problems. Net income decreased 23.1% when compared with the same quarter last year, which outperformed the S&P 500 but underperformed the machinery industry.

Shares are down 36.05% on the year, but this decline was actually not as bad as the broader market's plunge during that same time frame. One factor that may have helped cushion the fall somewhat was EPS improvement. Nonetheless, based on its current price in relation to its earnings, Danaher is still more expensive than most of the other companies in its industry.

We've downgraded General Dynamics(GD Quote) from buy to hold. Strengths include its revenue growth, impressive record of EPS growth and compelling growth in net income. Weaknesses include a decline in the stock price during the past year and weak operating cash flow.

Revenue slightly increased by 4.5% since the same quarter last year, outpacing the industry average of 2.7% and boosting EPS, which improved by 18.6%. We expect the company's two-year trend of positive EPS growth to continue, demonstrating an improvement in business performance. During the past fiscal year, General Dynamics increased its bottom line by earning $5.10 vs. $4.19 in the prior year, and this year, the market expects an improvement $6.17. The debt-to-equity ratio is very low at 0.18 and is currently below that of the industry average, implying very successful management of debt levels, but the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.