TSC Ratings' Updates: Archer Daniels

Shares are down 86.1% on the year, underperforming 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.

We've downgraded multiregional motor carrier Old Dominion Freight(ODFL Quote) from buy to hold. Strengths include its increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins.

Net income increased by 16.7% compared with the same quarter a year ago, outperforming the S&P 500 but underperforming the road and rail industry. Revenue increased 14.5%, compared with the industry average of 21.5%, and EPS increased. Net operating cash flow has increased to $50.02 million, or 38.14% when compared with the same quarter last year, but Old Dominion's cash flow growth rate is still lower than the industry average growth rate of 61.9%. The company's gross profit margin of 15.5% is rather low, though it has increased from the same period last year. The 5.6% net profit margin trails the industry average. ROE has slightly decreased, implying a minor weakness. On the basis of ROE, Old Dominion underperformed the industry average but outperformed the S&P 500.

We've downgraded energy infrastructure provider TransCanada(TRP Quote) from buy to hold. Strengths include its expanding profit margins, growth in earnings per share and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and a decline in the stock price during the past year.

TransCanada's gross profit margin of 49% is strong, having increased from the same quarter last year. Its net profit margin of 18.2% is above the industry average. EPS have improved by 11.7% in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, it increased its bottom line by earning $2.30 vs. $2.14 in the prior year. ROE has improved slightly, which can be construed as a modest strength in the organization. On the basis of ROE, TransCanada underperformed the oil, gas and consumable fuels industry and outperformed the S&P 500. Net operating cash flow has declined marginally to $825 million, or 1.07% when compared with the same quarter last year. The company's debt-to-equity ratio of 1.5 is quite high overall and when compared with the industry average, suggesting that the current management of debt levels should be re-evaluated. TransCanada also has a quick ratio of 0.54, which demonstrates the lack of ability of the company to cover short-term liquidity needs.

All ratings changes generated on Dec. 11are listed below.

Ticker	Company	Current	Change	Previous
ADM	Archer Daniels Midland	BUY	Upgrade	HOLD
AMSG	AmSurg	HOLD	Downgrade	BUY
ELRN	Elron Electronic Industries	SELL	Downgrade	HOLD
GSIG	GSI Group	SELL	Downgrade	HOLD
HYDI	Hydromer	SELL	Downgrade	HOLD
ODFL	Old Dominion Freight	HOLD	Downgrade	BUY
OPTI	Opti	FROZEN	Downgrade	HOLD
TRP	TransCanada	HOLD	Downgrade	BUY

Each business day, TheStreet.com 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.