Discover Financial Services - Upgrades & Downgrades

NEW YORK (TheStreet) - With net income jumping 14.3% to $258 million from the same quarter last year, TheStreet Ratings' stock model upgraded Discover Financial Services(DFS) to 'Buy' from 'Hold'.

TheStreet Ratings released rating changes on seven additional U.S. common stocks for June 24, 2010. Four stocks have been downgraded and four stocks have been upgraded by our stock model.

In financial results leading to the Discover upgrade, sales via Discover Card grew 6% to $22.9 billion while overdue balances fell to 4.5% in fiscal second quarter. Write offs of uncollectable loans, predicted by the company to be as high as 8.5% came in at just under 8.0%.

In a bullish signal of a healthier balance sheet, Discover's provision for future loan losses contracted by 44% and the company paid back $1.2 billion to the U.S. government's Troubled Asset Relief Program. The model sees upside potential for the share price above $18 in the next 12 months.

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Heading in the other direction with a downgrade to 'Sell' from 'Hold' is Farmer Bros Co(FARM). This company focuses on wholesale selling of coffee and tea to restaurants and other foodservice providers during a time when household budgets are under pressure and individuals are curtailing restaurant visits.

Farmer Bros lost $2.15 per share over the last 12 months and is expected to continue to lose money in the coming quarters. The model recommends cutting your losses now as the shares have stepped lower, breaking through support levels and look to test the March 2009 low of $14.26.

-- Reported by Kevin Baker in Jupiter, Fla.

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