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.
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.
develops and markets premium products and services for the hospitality, foodservice, healthcare and industrial markets.
Ecolab has been rated a buy since November 2002. This recommendation is based on the company's growing revenue, higher earnings, strong segmental performance, and healthy cash position. For the second quarter of fiscal 2008, Ecolab reported revenue growth of 15.2% year over year, aided by favorable currency translations and strategic acquisitions. Increased sales across all operating segments also contributed to the revenue growth. Net earnings in the second quarter surged 26.0% to $139.00 million from $110.30 million in the prior-year's quarter, due to solid performance in the U.S. and growth in Latin America and Asia Pacific. Cash and cash equivalents also rose during the quarter, increasing from $72.20 million to $222.00 million.
Based on the second-quarter results, Ecolab raised the bottom end of its full fiscal year 2008 earnings per share guidance to a range of $1.85 to $1.88 per share from an earlier estimate of $1.84 to $1.88 per share. The company also expects third-quarter sales from both domestic and international operations to increase year over year. However, low liquidity, falling margins, and rising debt levels could impact future profitability. The weak economic environment is also a cause for concern.
( ACL) is a research and development driven, global medical specialty company focused on eye care.
Alcon has been rated a buy since September 2004. Our rating is based on the company's solid revenue growth, strong sales growth from its key products, and increasing earnings. A healthy cash position, new product launches, and regulatory approvals further support the rating. For the second quarter of fiscal 2008, Alcon reported that its net earnings rose 26.3% year over year to $566.4 million. The increased earnings combined with strong volume growth to boost total sales by 17.9%, from $1.47 billion in the second quarter of fiscal 2007 to $1.74 billion in the most-recent quarter. Gross profit margin improved to 78.63% from $78.42%, while operating margin advanced 75 basis points to 37.21%. In addition, Alcon announced that it would build a fully functional pharmaceutical manufacturing plant in Singapore by 2012 in order to take advantage of growing demand in Asia. The company also received Food and Drug Administration approval for its Patanase nasal spray, which is used in the treatment of symptoms associated with allergic rhinitis.
Looking ahead to full year 2008, the company increased its sales guidance to a range of $6,460 million to $6,510 million, primarily because of a currency environment that remains more favorable than anticipated. The company also increased its guidance for diluted earnings per share to a range of $6.48 to $6.54. It is important to remember, however, that any regulatory denial of the company's new product developments and market penetrations could hamper its future revenue growth. In addition, the company's weak leverage level and disappointing returns on assets and equity may be a threat to its future rating.
is a global, broad-based healthcare company that discovers, develops, manufactures, and sells a diversified line of products that range from nutritional products and laboratory diagnostics to medical devices and pharmaceutical therapies.
We have rated Abbott a buy since April 2007, based on a variety of strengths such as the company's revenue growth, impressive record of earnings per share growth, and notable return on equity. For the second quarter of fiscal 2008, the company reported revenue growth of 14.8% year over year, with strong international results leading an overall strong performance across the company's diverse mix of global businesses. Revenue growth appears to have helped boost earnings per share, which improved 34.9% when compared with the second quarter of fiscal 2007. Net income increased 33.7%. Abbott's return on equity increased from 12.56% a year ago to 22.05% in the most-recent quarter, which we take to be a clear sign of strength within the company. In addition, net operating cash flow increased by 9.69% over the last year.
Looking ahead, Abbott raised its fiscal 2008 sales growth and EPS guidance based on its first-half results and its outlook for the remainder of the year. Full-year EPS guidance was changed from $3.20 - $3.25 to $3.24 - $3.28, while its sales guidance was increased to mid-teens growth for the full fiscal year. EPS guidance for the third quarter of fiscal 2008 was given as 76 cents to 78 cents per share. We do not currently see any significant weaknesses that are likely to detract from the generally positive outlook for this company, but keep in mind that the pharmaceuticals industry as a whole is vulnerable to patent expirations and legislative threats to pricing power.
operates retail stores worldwide.
Our buy rating for Wal-Mart has been in place since February 2008. This rating is based on a variety of strengths, including the company's solid stock price performance, growth in earnings per share, increases in net income and revenue, and notable return on equity. Over the past year, the company's stock price has risen 47.11% as investors recognized these strengths. For the second quarter of fiscal 2009, Wal-Mart improved its EPS by 14.7% year over year. Revenue growth of 10.5% appears to have contributed to the EPS increase. Net income also increased when compared to the same quarter a year ago, rising 16.8% from $2.95 billion to $3.35 billion. A slight improvement in return on equity can also be viewed as a modest strength for the company.
Management attributed record quarterly earnings and nearly $5 billion in free cash flow to solid operating performance and improved capital efficiency. Wal-Mart reported that it improved customer traffic and ticket and overall sales growth in all markets, and feels that it is well-positioned for the current economic environment despite inflation and higher fuel costs. Based on this, the company set its third-quarter guidance to be between 73 cents and 76 cents per share and raised its full fiscal year guidance to a range of $3.43 to $3.50 per share. While the company has had generally poor debt management on most measures we evaluated, we feel that Wal-Mart's strengths outweigh any weaknesses, and we believe that its stock price should continue to move higher despite having already enjoyed a nice gain in the past year.
is the world's sixth-largest food company, producing packaged consumer foods that are marketed in more than 100 countries.
We have rated General Mills a buy since November 2004. For the first quarter of fiscal 2009, the company reported that it achieved strong results, primarily due to strong consumer demand in worldwide markets. First-quarter revenue rose 13.8% year over year, but this revenue does not appear to have trickled down to the company's bottom line, as General Mills displayed a decline in earnings per share for the quarter. However, we feel that the company is poised for EPS growth in the coming year, despite reporting somewhat volatile earnings recently. Net sales grew 14.0% from $3.07 billion in the first quarter of fiscal 2008 to $3.5 billion in the most recent quarter. Net operating cash flow also increased significantly, rising 1,007.35% when compared with the same quarter last year. In addition, we consider the company's 37.30% gross profit margin to be strong.
Management was pleased with what it considered to be a great start to fiscal 2009, as sales and profit results for the first quarter exceeded management's expectations. General Mills increased its earnings guidance for fiscal 2009 to a range of $3.81 to $3.85 per share, up from its previously released forecast of $3.78 to $3.83 per share. The company also expects fiscal 2009 net sales to grow at a mid single-digit rate. Although the company's growth in net income has been sub par, we feel that its strengths outweigh any weaknesses it may display. Even the best stocks can fall in an overall down market, but in any other environment, we believe that this stock still has good upside potential despite the fact that it has already risen in the past year.
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.