Boeing, Verizon, Sears: Ratings Changes
BOSTON (TheStreet) -- The S&P 500 Index has tumbled 4.4% since Jan. 20. Even tech-darlings such as Apple (AAPL) - Get Report and Google (GOOG) - Get Report are getting squeezed.
What happened to the so-called quality rotation, in which investors shied away from risk and put their money on sure bets?
TheStreet.com's
stock model is reshuffling the large-cap deck, downgrading the fundamentally depraved and upgrading companies with improving prospects and share-price momentum. Here are six important rating changes.
6.
The quantitative equity model upgraded aerospace and defense company
Boeing
(BA) - Get Report
to "buy."
The numbers
: Boeing swung to a fourth-quarter profit of $1.3 billion, or $1.77 a share, from a loss of $86 million, or 12 cents, a year earlier. Revenue soared 42% to $18 billion. The company's operating margin climbed out of the negatives to 9.4%. Despite a $13 billion debt burden, the model gives Boeing a financial-strength score of 9.4 out of 10 due to favorable growth trends.
The stock
: Boeing has increased 51% during the past year, outperforming major U.S. indices. The stock jumped 11% in the past month, but value remains. The shares are cheaper than those of aerospace and defense peers based on sales and cash flow. They're expensive when considering projected earnings and book value. Boeing's PEG ratio, a measure of value relative to growth, is low at 0.3. By comparison, the industry average is 1.
5.
The model downgraded railroad operator
Norfolk Southern
(NSC) - Get Report
to "hold."
The numbers
: Fourth-quarter profit dropped 32% to $307 million, or 82 cents a share, as revenue decreased 16% to $2.1 billion. Norfolk Southern's operating margin narrowed from 32% to 26%. The company possesses adequate liquidity, evident in its quick ratio of 1. Its 0.7 debt-to-equity ratio is less than the industry average, indicating restrained leverage. But negative three-year growth rates are mitigating factors.
The stock
: Norfolk Southern has risen 26% during the past year, outpacing the
Dow Jones Industrial Average
, but trailing the S&P 500. The shares are undervalued relative to those of railroad peers based on projected earnings and book value. They're costly when considering sales and cash flow. Norfolk Southern's return on equity, a measure of profitability, trails the industry average.
4.
The model upgraded retailer
Sears Holdings
(SHLD)
to "hold."
The numbers
: The company's third-quarter loss narrowed 13% to $127 million, or $1.09 a share, as revenue dropped 4.4% to $10 billion. The company's operating margin remained in shallow negative territory. Sears has a poor liquidity position, evident in its quick ratio of 0.2. Its 0.4 debt-to-equity ratio reflects conservative leverage. The model gives Sears a financial-strength score of 7.9 out of 10.
The stock
: Sears has more than doubled during the past year, beating major U.S. indices. The shares are cheap in comparison to those of retail peers based on book value, sales and cash flow. They're expensive when weighing projected earnings. Sears suffered during the recession. It posted losses in four of the past seven quarters. But its fundamentals are improving.
3.
The model upgraded Germany-based
Siemens
(SI) - Get Report
, a maker of electronics equipment, to "buy."
The numbers
: Fiscal first-quarter net income increased 26% to $2.1 billion, and earnings per share climbed 22% to $2.41, hurt by a higher share count. Revenue declined 9% to $25 billion. The company's operating margin inched up from 9% to 10%. Siemens has a stable financial position, with $15 billion of cash and $28 billion of debt. Its 0.7 debt-to-equity ratio is less than the industry average, reflecting conservative leverage.
The stock
: Siemens has advanced 56% during the past year, more than major U.S. indices. The shares are cheap relative to those of conglomerate peers based on projected earnings, book value, sales and cash flow. But the company's PEG ratio of 0.3 is equal to the industry average, implying that the stock is fairly valued. The quarterly turnaround is being credited to cost reductions. Job cuts are planned for 2010.
2.
The model upgraded
Symantec
(SYMC) - Get Report
, known for its computer-security software, to "hold."
The numbers
: Symantec swung to a fiscal third-quarter profit of $300 million, or 37 cents a share, from an impairment-related loss of $6.8 billion, or $8.25, a year earlier. Revenue ascended 2% to $1.5 billion. The company's operating margin remained steady at 19%. Symantec has a liquid balance sheet, with $2.6 billion of cash and $1.8 billion of debt. The model gives Symantec a financial-strength score of 7.9 out of 10.
The stock
: Symantec increased 11% during the past year, underperforming major U.S. indices. The shares are cheap relative to those of software peers based on projected earnings, book value, sales and cash flow. They are pricey when comparing trailing earnings. The stock tumbled 8% last Thursday and Friday, following worse-than-expected full-year earnings guidance. Nevertheless, the model remains bullish on Symantec.
1.
The model downgraded integrated telecom company
Verizon
(VZ) - Get Report
to "hold."
The numbers
: Verizon swung to a fourth-quarter loss of $653 million, or 23 cents a share, from a profit of $1.2 billion, or 43 cents, a year earlier. The loss was attributed to one-time workforce-reduction costs. Revenue increased 10% to $27 billion. Verizon's operating margin slimmed from 19% to 17%. The company holds $2.5 billion of cash and $62 billion of debt. However, the model gives Verizon a financial-strength score of 9.4 out of 10 due to consistency.
The stock
: Verizon has fallen 3% during the past year, lagging behind major U.S. indices. The shares are cheap relative to those of telecom peers based on projected earnings, book value, sales and cash flow. In addition, Verizon's PEG ratio of 0.3 is less than the industry average of 1.2, indicating a discount if the company can increase profit at the long-run consensus estimate. Weak stock performance is a negative.
-- Reported by Jake Lynch in Boston.