CAE, Dresser-Rand: Ratings Changes

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BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded Canadian aerospace and defense company CAE(CAE) to "buy."

The numbers: Fiscal first-quarter profit decreased 42% to $27 million, or 11 cents a share, as revenue declined 2% to $383 million. Its gross margin rose from 23% to 24% and its operating margin remained steady at 19%. A quick ratio of 0.7 indicates less-than-ideal liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.

The stock: CAE is up 18% this year, beating the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio 13, indicating a discount to the market, but parity with aerospace and defense peers.

The model upgraded oil and gas equipment maker Dresser-Rand(DRC) to "buy."

The numbers: Second-quarter net income rose 29% to $60 million and earnings per share climbed 35% to 74 cents, boosted by a lower share count. Revenue grew 12% to $606 million. Its gross margin was unchanged at 30%, but its operating margin rose from 14% to 16%. A quick ratio of 0.7 demonstrates less-than-ideal liquidity. A debt-to-equity ratio of 0.4 reflects conservative leverage.

The stock: Dresser-Rand has advanced 81% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to the market and oil and gas equipment peers. The company doesn't pay dividends.

The model upgraded medical-device maker Masimo(MASI) to "buy."

The numbers: Second-quarter net income jumped 24% to $13 million and earnings per share rose 22% to 22 cents, restrained by a higher share count. Revenue grew 12% to $84 million. Its gross margin rose from 73% to 74% and its operating margin increased from 22% to 24%. A quick ratio of 3.9 indicates outstanding liquidity. The company holds minimal debt.