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J. Crew, Makita, Lorillard: Ratings Changes

BOSTON (TheStreet) -- U.S. stock-market indices gained Tuesday, but our ratings model soured on a few closely watched names. Here are three relevant downgrades.

3. TheStreet.com's stock-rating model downgraded specialty retailer J. Crew Group (JCG) to "hold."

The numbers: Third-quarter profit more than doubled to $44 million, or 67 cents a share, as revenue increased 14% to $414 million. J. Crew's operating margin widened from 9% to 18%. The company possesses a liquid balance sheet, with $247 million of cash and $99 million of debt. The model gives J. Crew a financial-strength score of 7 out of 10 and a growth score of 7.7. Its volatility score of 3.1 weakens its overall ranking.

The stock: J. Crew soared 311% during the past year, outperforming major U.S. indices and earning a performance score of 7.2. However, the stock has fallen 8.8% during the past month, in anticipation of fourth-quarter earnings. The shares are overpriced in comparison to those of specialty retail peers based on all of our valuation measures, including trailing earnings, projected earnings, book value, sales and cash flow.

2. The model downgraded power-tool maker Makita (MKTAY), which reported quarterly results Friday, to "hold."

The numbers: Fiscal third-quarter profit tumbled 42% to $63 million, or 46 cents a share, as revenue fell 36% to $627 million. Makita's operating margin narrowed from 17% to 14%. The company has an admirable financial position, with $1 billion of cash and $10 million of debt. The model gives Makita a financial strength score of 8.2 out of 10, higher than the "buy"-list average.

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