Estee Lauder, Acme Packet: Ratings Changes

BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded communications equipment maker Acme Packet(APKT) to "buy."

The numbers: Third-quarter net income surged 76% to $3.6 million and earnings per share doubled to 6 cents. Revenue grew 28% to $36 million. The company's gross margin decreased from 85% to 81%, but its operating margin rose from 9% to 14%. Acme Packet has an ideal financial position, with $159 million of cash and no debt.

The stock: Acme Packet has advanced 79% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 49, a premium to the market and communications equipment peers. The company doesn't pay dividends.

The model downgraded Duke Realty(DRE), a real estate investment trust focused on office properties, to "sell."

The numbers: The company swung to a third-quarter loss of $305 million, or $1.44 a share, from a year-earlier profit of $32 million, or 8 cents. Revenue grew 32% to $328 million. The company's gross and operating margins fell into negative territory. Duke Realty holds just $156 million of cash and $3.9 billion of debt. A debt-to-equity ratio of 1.3 indicates excessive leverage.

The stock: Duke Realty is up 4% this year, trailing major U.S. indices. The company has posted losses for two consecutive quarters. The shares pay a 6% cash distribution yield.

The model upgraded Estee Lauder(EL), a seller of make-up and fragrances, to "buy."

The numbers: Fiscal first-quarter net income almost tripled to $141 million, or 71 cents a share, as revenue declined 3% to $1.9 billion. The company's gross margin decreased from 77% to 76%, but its operating margin rose from 5% to 14%. A quick ratio of 1.2 demonstrates adequate liquidity. A debt-to-equity ratio of 0.8 indicates reasonable leverage.

The stock: Estee Lauder is up 43% this year, more than major U.S. indices. The stock trades at a price-to-earnings ratio of 27, a premium to the market and personal-product makers. The shares pay a 1.2% dividend yield.

The model upgraded insurer Erie Indemnity(ERIE) to "buy."

The numbers: Third-quarter profit increased nine-fold to $40 million, or 69 cents a share, as revenue grew 19% to $313 million. The company's gross margin rose from 11% to 19%, and its operating margin jumped from 7% to 19%. Erie Indemnity has an ideal financial position, with $78 million of cash and no debt.

The stock: Erie Indemnity has fallen 6% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 26, a premium to the market, but a discount to insurers. The shares pay a 5.1% dividend yield.

The model downgraded insurer Infiniti Property & Casualty(IPCC) to "hold."

The numbers: Second-quarter net income increased 39% to $17 million and earnings per share surged 65% to $1.22, boosted by a lower share count. Revenue declined 9% to $226 million. The company's gross margin rose from 10% to 12%, and its operating margin increased from 9% to 12%. Infiniti has a stable financial position, with $209 million of cash and $200 million of debt.

The stock: Infiniti Property & Casualty is down 17% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 26, a premium to the market, but a discount to insurance peers. The shares pay a 1.2% dividend yield.

-- Reported by Jake Lynch in Boston.

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