TSC Ratings' Updates: Fluor

We've downgraded Gen-Probe(GPRO Quote), which develops, manufactures, and markets nucleic acid probe-based products used for the clinical diagnosis of human diseases and for screening donated human blood, from buy to hold. Strengths include its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock has had a decline in price during the past year.

Revenue is up 19.1% since the same quarter a year ago, outpacing the industry average growth rate of 15.1% and boosting EPS. Gen-Probe has a debt-to-equity ratio of zero and maintains a quick ratio of 10.76, which clearly demonstrates the ability to cover short-term cash needs. Its return on equity has improved slightly compared with the same quarter one year prior, which can be construed as a modest strength in the organization. On the basis of ROE, Gen-Probe has underperformed the health care equipment and supplies industry average but outperformed the S&P 500.

Shares are down 36.24% on the year, apparently dragged down in part by the decline we have seen in the S&P 500. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Gen-Probe is still more expensive than most of the other companies in its industry.

We've downgraded St. Jude Medical(STJ Quote), which designs, manufactures and distributes cardiovascular medical devices and implantable neurostimulation devices worldwide, from buy to hold. Strengths include its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.