Aetna, FirstEnergy: Ratings Changes

BOSTON (TheStreet) -- TheStreet.com's stock-rating model upgraded health insurer Aetna(AET) to "buy."

The numbers: Third-quarter net income increased 18% to $326 million and earnings per share rose 26% to 73 cents. Revenue grew 14% to $8.7 billion. Aetna's gross margin declined from 25% to 24%, and its operating margin dropped from 7% to 6%. The company has a strong financial position, with $3.8 billion of cash and $3.7 billion of debt.

The stock: Aetna has risen 4% this year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 10, a discount to the market and health care service providers. The shares pay a 0.3% dividend yield.

The model downgraded electricity provider FirstEnergy(FE) to "hold."

The numbers: Third-quarter profit fell 50% to $235 million, or 77 cents a share, as revenue decreased 13% to $3.4 billion. FirstEnergy's gross margin declined from 33% to 29%, and its operating margin dropped from 22% to 15%. A quick ratio of 0.3 demonstrates poor liquidity. A debt-to-equity ratio of 1.8 reflects excessive leverage.

The stock: FirstEnergy has fallen 13% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 12, a discount to the market and electric utilities. The shares pay a 5.2% dividend yield.

The model downgraded oil and gas company Southwestern Energy(SWN) to "hold."

The numbers: Third-quarter profit decreased 46% to $118 million, or 34 cents a share, as revenue fell 26% to $503 million. Southwestern Energy's gross margin rose from 59% to 61%, but its operating margin fell from 44% to 39%. A quick ratio of 0.4 indicates weak liquidity. A debt-to-equity ratio of 0.4 reflects conservative leverage.