The following ratings changes were generated on Friday, Nov. 14
We've upgraded Alaska Air Group (ALK) from sell to hold. Strengths include its revenue growth, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. Weaknesses include deteriorating net income, poor profit margins and disappointing return on equity.
Revenue increased by 3.4% since the same quarter one year ago. Alaska Air's current debt-to-equity ratio of 1.7 is below the industry average, suggesting that this level of debt is acceptable within the airlines industry. The gross profit margin of 1.1% is extremely low, having decreased significantly from the same period last year. The 8.5% net profit margin trails the industry average.
Net income is down 205.7% from the same quarter a year ago, to -$86.5 million, underperforming the S&P 500 and the airlines industry. Alaska's share price has not changed very much compared with where it was trading a year ago, due to the relatively week year-over-year performance of the overall market and the company's stagnant earnings. There is currently no conclusive evidence that warrants the purchase or sale of this stock.We've downgraded Berkshire Hathaway (BRK.A) from buy to hold. Strengths include its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses, including a decline in the stock,price during the past year, deteriorating net income and premium valuation. Berkshire Hathaway, with its revenue decline of 6.7% since the same quarter one year ago, slightly underperformed the industry average of 6.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share. It has experienced a steep decline in earnings per share in the most recent quarter compared with its performance from the same quarter a year ago. During the past fiscal year, it increased its bottom line by earning $8,546 vs. $7,143 in the prior year. For the next year, the market is expecting a contraction of 34.4% in earnings to $5,605. Berkshire's debt-to-equity ratio of 0.3 is low, but it is higher than that of the industry average.
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