TSC Ratings' Updates: Genuine Parts

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Wednesday, May 13.

We've downgraded EnergySolutions(ES Quote) from hold to sell, driven by its generally weak debt management and poor profit margins.

The company's 1.2 debt-to-equity ratio is high relative to the industry average, suggesting a need for better debt-level management. In addition, the quick ratio of 0.9 implies difficulty in avoiding short-term cash problems. EnergySolutions' gross profit margin of 16.3% has decreased from the same quarter last year, and its net profit margin of 0.6% trails the industry average. Revenue fell 4.2% from the year-ago quarter, though EPS increased significantly in the most recent quarter, and we think the company's yearlong trend of EPS growth should continue.

Shares are down 65.9% over the past year, underperforming the S&P 500.

We've upgraded Energy Transfer Equity(ETE Quote) from hold to buy, driven by its growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

EPS are up 19.3% in the most recent quarter compared with the year-ago quarter, and we feel that the company's two-year trend of positive EPS growth should continue. Net income increased by 19.6% compared with the year-ago quarter, from $126.7 million to $151.5 million. The company's 0.7 quick ratio is weak. Net operating cash flow increased 20% to $317.8 million compared with the year-ago quarter. Revenue fell by 38.2%.