Avocent, CenterPoint Energy: Ratings Changes

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BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded communications equipment maker Avocent(AVCT) to "hold."

The numbers: The company swung to a second-quarter loss of $3.4 million, or 8 cents a share, from a profit of $3.4 million, or 8 cents, in the year-earlier period. Revenue declined 19% to $129 million. Its gross margin remained steady at 59%, but its operating margin fell from 7% to 2%. A quick ratio of 1.4 demonstrates ample liquidity. A debt-to-equity ratio of 0.2 indicates modest leverage.

The stock: Avocent has advanced 18% this year, outpacing the Dow Jones Industrial Average and S&P 500 Index. The company, which posted losses for the past two quarters, doesn't pay dividends.

The model downgraded utility CenterPoint Energy(CNP) to "hold."

The numbers: Second-quarter net income dropped 15% to $86 million, or 24 cents a share. Revenue declined 39% to $1.6 billion. Its gross margin rose from 18% to 27% and its operating margin increased from 11% to 15%. A quick ratio of 0.5 indicates less-than-ideal liquidity. A debt-to-equity ratio of 4.5 demonstrates excessive leverage.

The stock: CenterPoint has fallen 1% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to the market and utility peers. The shares offer a 6.1% dividend yield.

The model downgraded insurer Donegal Group(DGICA) to "hold."

The numbers: Second-quarter revenue grew 1% to $95 million, but profit dropped 31% to $4.4 million, or 17 cents a share. Its gross margin fell from 10% to 6% and its operating margin decreased from 9% to 6%. The company has an ideal financial position, with $69 million of cash and $15 million of debt.

The stock: Donegal Group is down 7% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 23, a premium to the market, but a discount to other insurers. The shares offer a 2.9% dividend yield.

The model upgraded China-based medical device maker Mindray Medical International(MR) to "buy."

The numbers: Second-quarter profit increased 37% to $33 million, or 29 cents a share, as revenue jumped 10% to $160 million. Its gross margin rose from 53% to 57%, but its operating margin remained steady at 24%. A quick ratio of 1.4 indicates adequate liquidity. A debt-to-equity ratio of 0.3 demonstrates conservative leverage.

The stock: Mindray Medical has surged 81% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 31, a premium to the market, but a discount to medical equipment peers. The shares offer a 0.6% dividend yield.

The model downgraded oil and gas trust San Juan Basin Royalty Trust(SJT) to "hold."

The numbers: Second-quarter profit plummeted 95% to $1.8 million, or 4 cents a share, as revenue fell 93% to $2.5 million. Its gross margin was little-changed at 100%, but its operating margin fell from 98% to 72%. The company has a strong financial position, with $430,000 of cash and no debt.

The stock: San Juan Basin Royalty Trust is down 42% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 9, a discount to the market and oil and gas peers. The shares offer a 3.6% dividend yield.

-- Reported by Jake Lynch in Boston.

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