TSC Ratings' Updates: Exide Technologies

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.

We've upgraded CSX(CSX Quote) from hold to buy, driven by its attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Return on equity has improved slightly compared with the same quarter last year, which can be construed as a modest strength in the organization. Revenue fell 17.2%, and EPS decreased by 27.1%. The company has reported somewhat volatile earnings lately, and we feel it is likely to report an earnings decline in the coming year. Net income decreased by 29.9% compared with the year-ago quarter, falling from $351 million to $246 million, outperforming the S&P 500 but underperforming the road and rail industry average.

We've upgraded Flanders(FLDR Quote) from sell to hold. Strengths include the company's impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures and relatively strong performance when compared with the S&P 500 during the past year. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Flanders reported significant EPS improvement in the most recent quarter compared with the same quarter a year ago, and we feel that the company's yearlong pattern of EPS growth should continue. The 0.4 debt-to-equity ratio is low and below the industry average, implying successful management of debt levels. The 1.1 quick ratio illustrates an ability to avoid short-term cash problems. Revenue fell 2.4% compared with the same quarter last year, though EPS increased. Flanders' gross profit margin of 20.6% is low but has increased from the same period last year, and its 3.7% net profit margin compared favorably with the industry average. Net operating cash flow fell 50.5% to $1.8 million.