TSC Ratings' Updates: Freeport-McMoRan

The following ratings changes were generated on Tuesday, Jan. 27.

We've upgraded energy services holding company AGL Resources(ATG Quote) from hold to buy, driven by its revenue growth, growth in earnings per share, increase in net income, notable return on equity and relatively strong performance when compared with the S&P 500 during the past year. 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 46.1% since the year-ago quarter, outperforming the average industry growth of 33.5%. AGL also reported significant earnings per share improvement in the most recent quarter compared with the same quarter a year ago. Stable EPS over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. Net income increased by 400% compared with the year-ago quarter, from $13 million to $65 million, and ROE improved slightly.

Shares fell 15.2% over the year, reflecting, in part, the market's overall decline. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

We've downgraded Freeport-McMoRan Copper & Gold(FCX Quote) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.