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.
stock-rating model downgraded specialty retailer
J. Crew Group
: 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.
: 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.
The model downgraded power-tool maker
, which reported quarterly results Friday, to "hold."
: 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.
: Makita rose 66% during the past year, outpacing major U.S. indices and earning a performance score of 6.2. The shares have fallen 3.2% over the past month, in conjunction with the broader market. The shares are costly relative to those of household-durables peers based on trailing earnings and sales. They are fairly valued when considering book value and are cheap on the basis of cash flow.
The model downgraded cigarette maker
, which owns the Newport brand, to "hold." The company is scheduled to report fourth-quarter results Monday.
: Third-quarter net income declined 0.9% to $236 million, but earnings per share climbed 4.3% to $1.44, boosted by a lower share count. Revenue inched up 1.8% to $953 million. Lorillard's operating margin remained steady at 41%. The company has a strong financial position relative to its peers. It holds $1.5 billion of cash and $751 million of debt.
: Lorillard advanced 30% during the past year, matching the
Dow Jones Industrial Average
, but trailing the
S&P 500 Index
. The shares declined 3.1% during the past month, hurt by the broader market pullback. They are expensive relative to those of tobacco peers based on book value, sales and cash flow, but are cheap when considering trailing and projected earnings. Lorillard offers an attractive 5.1% dividend yield.
-- Reported by Jake Lynch in Boston.