TSC Ratings' Updates: IBM

The following ratings changes were generated on Thursday, Feb. 19.

We've downgraded energy products and services supplier Constellation Energy(CEG Quote) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Net income decreased from $261.4 million in the year-ago quarter to -$1,402.6 million in the most recent quarter, significantly underperforming the S&P 500 and the independent power producers and energy traders industry. Return on equity also greatly decreased, a signal of major weakness within the corporation. The company's debt-to-equity ratio of 2.5 is very high and currently higher than the industry average, implying very poor management of debt levels. The 0.6 quick ratio demonstrates a lack of ability to cover short-term liquidity needs. Constellation's 6.9% gross profit margin is extremely low, having decreased from the year-ago quarter.

Shares have tumbled by77.1% over the past year, underperforming the S&P 500, and earnings per share are down 645.8% compared with the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, 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 downgraded Goodyear Tire & Rubber(GT Quote) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.