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TSC Ratings' Updates: Panasonic

Stocks in this article: PC WSM ATK

Shares are down 46.2% on the year, probably driven by the decline of similar magnitude in the overall market, as well as by lower earnings per share compared to the same quarter one year earlier. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

We've downgraded home products retailer Williams-Sonoma (WSM) from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

Williams-Sonoma experienced a steep decline in earnings per share of 140% in the most recent quarter in comparison with its performance from the same quarter a year ago. Earnings per share have declined over the last two years, and we anticipate that this should continue in the coming year. During the past fiscal year, the company reported lower earnings of $1.79 vs. $1.81 in the prior year. For the next year, the market is expecting a contraction of 87.7% in earnings to 22 cents. Net income has significantly decreased by 140.6% compared with the same quarter a year ago, underperforming the specialty retail industry and the S&P 500. Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. On the basis of ROE, Williams-Sonoma has underperformed the industry but outperformed the S&P 500.

Revenue fell by 16% since the same quarter a year ago, underperforming the industry average. Shares are down 71.7% on the year, which is worse than the decline in the S&P 500. The fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Other ratings changes include Kenneth Cole Productions (KCP) and Supreme Industries (STS), both downgraded from hold to sell.

All ratings changes generated on Dec. 5 are listed below.

Ticker Company Current Change Previous
ADS Alliance Data Systems HOLD Downgrade BUY
ARJ Arch Chemicals HOLD Downgrade BUY
ATK Alliant TechSystems HOLD Downgrade BUY
CFFC Community Financial SELL Downgrade HOLD
COV Covidien SELL Downgrade HOLD
CW Curtiss-Wright HOLD Downgrade BUY
DDMX Dynamex HOLD Downgrade BUY
FCBN First Citizens Bancorp SELL Downgrade HOLD
FGXI FGX International HOLD Upgrade SELL
HBOS Heritage Financial SELL Downgrade HOLD
HDNG Hardinge SELL Downgrade HOLD
HEI.A Heico Heico Downgrade BUY
HITT Hittite Microwave HOLD Downgrade BUY
KCP Cole Kenneth SELL Downgrade HOLD
NFG National Fuel Gas HOLD Downgrade BUY
NHP Nationwide Health HOLD Downgrade BUY
PC Panasonic SELL Downgrade HOLD
PNC PNC Financial HOLD Downgrade BUY
PRCP Perceptron SELL Downgrade HOLD
STS Supreme Industries SELL Downgrade HOLD
SUMT SumTotal Systems SELL Downgrade HOLD
WEL Boots & Coots HOLD Downgrade BUY
WSM Williams-Sonoma SELL Downgrade HOLD

Each business day, Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

This article was written by a staff member of Ratings.
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