TSC Ratings' Updates: Biogen Idec

The following ratings changes were generated on Friday, Jan. 30.

We've downgraded Allstate(ALL Quote), which engages in the personal property and casualty insurance business, from hold to sell, driven by its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income decreased from $760 million in the year-ago quarter to -$1,129 million, significantly underperforming the S&P 500 and the insurance industry. Return on equity also greatly decreased, a signal of major weakness within the corporation. Net operating cash flow fell 73.1% to $354 million, and earnings per share declined by 255.1%. Though the company has reported a trend of declining earnings per share over the past two years, the consensus estimate suggests that this trend should reverse in the coming year.

Shares are down 55% over the last year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

We've upgraded Biogen Idec(BIIB Quote), which engages in the development, manufacture and commercialization of novel therapies primarily in the areas of oncology, neurology, immunology and cardiology, from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.