TSC Ratings' Updates: Sears

We've upgraded IdaCorp(IDA Quote), which engages in the generation, transmission, distribution, sale and purchase of electric energy in the U.S., from hold to buy, driven by its revenue growth, expanding profit margins, good cash flow from operations, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

Revenue rose by 14.6% since the same quarter a year ago, outpacing the industry average of 9.8% growth and boosting EPS. Net income is up 78.7%, outperforming both the electric utilities industry and the S&P 500. IdaCorp's gross profit margin of 35.8% is strong, having increased from the same quarter the previous year, and its net profit margin of 17.3% exceeds the industry average. Net operating cash flow has significantly increased by 979.1% to $61.9 million when compared with the same quarter last year. In addition, IdaCorp has also vastly surpassed the industry average cash flow growth rate of 25.23%.

EPS improved significantly in the most recent quarter compared with the same quarter last year. During the past fiscal year, it reported lower earnings of $1.86 vs. $2.34 in the prior year. This year, the market expects an improvement in earnings to $2.25.

We've downgraded integrated poultry processing company Sanderson Farms(SAFM Quote), from hold to sell, driven by its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share.

Net income decreased by 315.7% since the same quarter a year ago, from $24.07 million to -$51.92 million, underperforming both the S&P 500 and the food products industry. Return on equity also decreased, a signal of major weakness within the corporation. On the basis of ROE, Sanderson significantly underperformed the industry average and the S&P 500. Revenue increased by 7.8%, trailing the industry average growth rate of 35.5%.