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TSC Ratings' Updates: Abraxis BioScience

The following ratings changes were generated on Wednesday, March 18.

We've downgraded biotechnology company Abraxis BioScience (ABII) from hold to sell, driven by its feeble growth in its earnings per share and deteriorating net income.

Earnings per share declined steeply in the most recent quarter compared with the same quarter last year; in fact, the company has suffered a two-year pattern of declining EPS. Nte income fell from -$5.2 million in the year-ago quarter to -$181.9 million, significantly underperforming the S&P 500 and the biotechnology industry. The 93.5% gross profit margin is very high, though it has decreased from the same period last year. The -197.3% net profit margin significantly underperformed the industry average. Return on equity significantly underperforms the industry average and the S&P 500.

Shares are down 15.5% over the past year, reflecting in part the market's overall decline, which was actually deeper.

We've downgraded electronics distributor Arrow Electronics (ARW) from hold to sell, driven by its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income fell from $114 million in the year-ago quarter to -$871.9 million in the most recent quarter, significantly underperforming the S&P 500 and the electronic equipment, instruments and components industry. ROE also greatly decreased, a signal of major weakness within the corporations. Arrow's 12.7% gross profit margin is extremely low, having decreased from the year-ago quarter. EPS have declined by 893.5% compared with the year-ago quarter, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year.

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