TSC Ratings' Updates: Disney

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 Friday, May 22.

We've upgraded CenturyTel(CTL) 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 somewhat weak growth in earnings per share.

The company's debt-to-equity ratio of 0.95 is below the industry average, but its quick ratio of 0.6 displays a potential problem in covering short-term cash needs. The 63.1% gross profit margin has decreased from the year-ago quarter. The 10.6% net profit margin compared favorably with the industry average. Revenue fell by 2% since the same quarter last year, and Return on equity also decreased.

Shares are down 15.5% over the past year, in part reflecting the market's overall decline. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.

We've upgraded Disney(DIS) from hold to buy, driven by its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Disney's debt-to-equity ratio of 0.4 is below the industry average. Its quick ratio is 0.8 and could be cause for future problems. Revenue dropped by 7.2% since the year-ago quarter, and EPS decreased. Net income fell 45.9% compared with the year-ago quarter, from $1.1 billion to $613 million. ROE decreased from the same quarter last year, implying a minor weakness in the organization.