TSC Ratings' Updates: Hewlett-Packard

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 Monday, May 18.

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

Alcon's 0.2 debt-to-equity ratio is below the industry average, and its quick ratio is 2.1. Its 79.2% gross profit margin has increased from the same quarter last year. Net profit margin of 30.3% outperformed the industry average. Net operating cash flow increased 2.8% compared with the year-ago quarter to $409.4 million, and EPS improved by 5.6%. The company has demonstrated a pattern of positive EPS growth over the past two years, but we anticipate underperformance relative to this pattern in the coming year. Revenue fell 2.8% compared with the year-ago quarter.

We've upgraded Danaher(DHR Quote) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Danaher's 0.3 debt-to-equity ratio is below the industry average, and its quick ratio is 1.1. The 51% gross profit margin has increased from the same quarter last year, and the net profit margin of 9% is above the industry average. Revenue fell by 13.2% since the year-ago quarter, and EPS declined by 13.3%. We feel that the company is likely to report a decline in EPS in the coming year. Net income decreased by 14%, from $276.5 million to $237.7 million.