Each business day, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list is based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
provides rail transportation through its principal operating company, Union Pacific Railroad Company, which runs the largest railroad in North America.
Union Pacific has been rated a buy since February 2005 due to its record of earnings per share growth, improvements in revenue and net income, consistent cash flow from operations, and solid stock price performance. During the second quarter of fiscal 2008, the company's earnings grew 19.1% year-over-year, boosted by higher shipments of coal, grain and fertilizer. Earnings were partially offset by rising fuel costs and the recent flooding in the Midwest. Additionally, net operating cash flow increased 32.93% when compared to the second quarter last year.
While the recent Midwest flooding caused a decrease in earnings for the second quarter, management was pleased with the resiliency that Union Pacific's network exhibited after the crisis, with a quick restoration of service allowing the company to finish the quarter strongly. The company anticipates challenges from high fuel prices and a soft economy going forward, but expects that it will be able to take advantage of the opportunities presented by a diverse business mix. However, any failure to counter these issues could affect the company's future prospects.
owns one of the largest rail networks in the U.S. CSX has been rated a buy since September 2004. We are encouraged by the company's strong financial performance in the second quarter of fiscal 2008, including its growth in net income and revenue.
The second-quarter results reflected a 14.9% year-over-year increase in revenue and a 17% increase in operating income, both of which were all-time records for the company. Revenue increased in eight of the company's 10 markets due to strong demand for export coal, grain, ethanol, metals and phosphates and fertilizers. Net income grew 18.8% to $385.00 million. Additionally, the company experienced strong earnings growth of 31.0%, which helped drive the stock price up 27.58% over the past year.
Looking ahead to full year 2008, the company reiterated that it expects to achieve the upper end of its previously announced EPS guidance of $3.40 to $3.60 a share on a comparable basis. Bear in mind, however, that CSX's business is cyclical in nature. While the company has done well so far at avoiding problems caused by changing economic conditions, it could still be sensitive to such changes in the future.
primarily operates and franchises McDonald's restaurants. We have rated McDonald's a buy since March 2004, based on strengths such as its solid stock price performance and impressive record of earnings per share growth. The company announced that its comparable sales and guest counts grew across all geographic segments in the second quarter of fiscal 2008. Profitability also increased during the second quarter.
McDonald's revenue increased 4% year-over-year, contributing to significant earnings per share improvement from a loss of 59 cents a share in the second quarter of fiscal 2007 to $1.04 in the most recent quarter. Net income surged 267.3% when compared to the same quarter a year ago. Additionally, the company experienced double-digit operating income growth in several geographic regions (Europe and Asia/Pacific, the Middle East, and Africa) and produced solid quarterly results in the United States.
Looking ahead, management believes the company will continue to have momentum due to a collective focus on delivering quality products at good value. While the company may currently harbor some minor weaknesses, we do not expect them to have a significant impact on McDonald's future financial results.
is a provider of investment management, asset and fund administration, fiduciary and banking services to corporations, institutions and affluent individuals.
Northern Trust has been rated a buy since March 2005. On July 16, the company announced that it achieved strong core results in the second quarter of fiscal 2008. Earnings increased 4.2% year-over-year, aided by revenue growth of 24%. Net income inched up to $215.60 million from $206.90 million a year ago. During the second quarter, the company repurchased 39,782 shares for a total cost of $2.90 million.
Management was pleased with the second quarter results in the face of a challenging business climate. Bear in mind, however, that any adverse movements in global capital markets may impact Northern Trust's future financial performance.
uses advanced information technology to provide customer solutions worldwide. Our buy rating for IBM has been in place since August 2005. This is based on factors such as the company's revenue growth, impressive record of earnings per share growth and compelling growth in net income.
For the second quarter of fiscal 2008, IBM's revenue rose by 12.8% year-over-year. This appears to have helped boost EPS, which improved 27.7%, rising from $1.55 a share in the second quarter of fiscal 2007 to $1.98 a share in the most recent quarter. The company's EPS has trended upward over the past two years.
IBM's net income increased 23.3% when compared to the same quarter one year prior. Additionally, the company's net operating cash flow increased 24.94% to $4.3 billion when compared to the same quarter last year.
Management was pleased with IBM's results for the second quarter and first half of fiscal 2008. With 18% of the company's geographic revenue coming from growth markets, management believes IBM has the ability to thrive in both emerging and established markets. Management also stated that IBM has a competitive edge in the global economy due to its business model.
The company remains optimistic about its outlook for the full fiscal year and for its plans to earn between $10 and $11 a share in 2010. Bear in mind, however, that the company's future performance is subject to a variety of factors, including its ability to continue developing and marketing new and innovative products and services, the overall economic environment, and the business condition of IBM's distributors or resellers.
Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.
However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe a rating alone cannot tell the whole story and should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.