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. The railroad covers 23 states across the western two-thirds of the United States, and ships products such as automobiles and automobile parts, agricultural products, coal, liquid and dry chemicals, plastics and liquid petroleum products.
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. Net income rose to $531 million in the quarter from $446 million in the second quarter of fiscal 2007. Earnings per share also increased, rising 23.6% to $1.02 per share from 83 cents per share in the same quarter last year, while revenues improved 12.9%. Additionally, net operating cash flow increased 32.93% when compared with 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.
is a global oilfield services company that supplies technology, project management and information solutions that optimize performance in the oil and gas industry.
Our buy rating for Schlumberger has not changed since November 2004. This rating is based on strengths such as the company's robust revenue growth, largely solid financial position, growth in earnings per share (EPS) and increase in net income. For the second quarter of fiscal 2008, the company reported revenue growth of 19.6% year over year. While this trails the industry average of 28.4%, the growth appears to have trickled down to the company's bottom line, improving EPS by 13.7% when compared with the same quarter last year. Net income increased 12.8%, going from $1.26 billion in the first quarter of fiscal 2007 to $1.42 billion in the most-recent quarter. Schlumberger currently has a favorable debt-to-equity ratio and maintains an adequate quick ratio of 1.26, which illustrates its ability to avoid short-term cash problems. During the second quarter, the company repurchased 5.45 million shares of common stock for a total price of $555 million to complete the 40-million-share repurchase program announced in 2006.
Management announced that all geographical areas, except North America, showed improved margin performance in the quarter due to strong sequential growth in the Eastern Hemisphere. A prolonged spring break-up in Canada offset the growth experience in other parts of North America. Schlumberger anticipates adding approximately 35 offshore rigs to its fleet in the remaining half of the year, while the company's land rig count has evolved along the lines of what it had predicted. Bear in mind that Shlumberger's future financial performance could be negatively impacted by a steep drop in demand and that the rise in Schlumberger's stock price over the past year has driven the stock to a level that is at a premium when compared with the rest of the industry. However, we feel that the company's strengths justify the higher price levels at this time.
International Business Machines
uses advanced information technology to provide customer solutions worldwide. The company's solutions include technologies, systems, products, services, software and financing, either singularly or in some combination.
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 (EPS) 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 per share in the second quarter of fiscal 2007 to $1.98 per share in the most-recent quarter. The company's EPS has trended upwards over the past two years. IBM's net income increased 23.3% when compared with the same quarter one year prior. Additionally, the company's net operating cash flow increased 24.94% to $4.3 billion when compared with 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 revenues coming from growth markets, management expressed its belief that 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 2008 and for its plans to earn between $10.00 to $11.00 per 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.
owns one of the largest rail networks in the U.S. CSX also provides multimodal transportation of domestic highway trailers and containers, and operates a premium parcel business, as well as international steamship containers through CSX Intermodal.
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 ten markets due to strong demand for export coal, grain, ethanol, metals and phosphates and fertilizers. Net income grew 18.8% to $385 million. Additionally, the company experienced strong earnings growth of 31%, 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 per 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.
is one of the world's largest integrated energy companies. The company is engaged in every aspect of the oil and natural gas industry, with major operations in many important gas and oil producing regions worldwide. Chevron is headquartered in California, and conducts operations in more than 100 countries.
We have rated Chevron a buy since October 2003. This rating is based in part on the company's strong growth in revenue and earnings, as well as its attractive valuation levels. For the first quarter of fiscal 2008, Chevron's revenue rose 39.6% year over year. The company reported a net income of $5.17 billion, or $2.48 per diluted share, compared with $4.72 billion, or $2.18 per diluted share, in the first quarter of fiscal 2007. This represented a 9.6% increase in net income, while earnings per share improved 13.8% when compared with the same quarter one year ago. Additionally, net sales for the quarter were boosted by higher prices for crude oil, natural gas, and refined products, growing to $64.66 billion from $46.30 billion a year ago.
The company reported that strong cash flows from operations allowed it to fund major development projects as a foundation for future growth. Bear in mind, however, that the company's performance depends largely on the movements of crude oil and natural gas prices. Any adverse changes in these prices could negatively impact revenue. Furthermore, lower sales volumes and margins on the sale of refined products could also negatively affect the company's bottom line.
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.