Each weekday, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.
While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Discount air carrier
has been downgraded to a sell from a hold. The company's 3.06 debt-to-equity ratio is higher than the airline industry average. TheStreet.com Ratings also feels that JetBlue's gross profit margin is lower than what is desirable, coming in at 25.2%. In spite of these weaknesses, the company's stock remains relatively expensive in relation to its peers, which tends to reduce the upside potential. JetBlue had been rated a hold since November 2006.
TheStreet.com Ratings has initiated coverage of oil and gas driller
with a sell rating. The company lost 85 cents per share in the first quarter of fiscal 2007 after earning 36 cents per share in the same quarter a year earlier. In spite of this, XCO's stock price has actually shot up 36.7% over the past 12 months. TheStreet.com Ratings does not feel this trend is likely to continue. In fact, the sharp appreciation of the stock over the past year should be a sign prompting investors to seek better opportunities elsewhere.
Adams Respiratory Therapeutics
( ARXT) has been downgraded to a sell from a hold. The company specializes in over-the-counter and prescription treatments for respiratory disorders, including products marketed under the Mucinex brand name. Net income declined 83.1% in the third quarter of fiscal 2007 compared with the year-earlier period. ARXT's stock performance has also been disappointing, with share value declining 9.4% over the past year. Looking ahead, TheStreet.com Ratings does not see anything in the company's numbers that could spark a turnaround. Adams Respiratory Therapeutics had been rated a hold since April 2007.
Service Corporation International
has been upgraded to a buy from a hold. The company provides funeral and cemetery services in North America and Germany. SCI improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year earlier. TheStreet.com Ratings is looking for more earnings growth in the coming year. That could fuel further increases in the stock price, even though it has already shot up 61.9% over the past 12 months. Service Corporation International had been rated a hold since May 2005.
Fashion designer and retailer
Kenneth Cole Productions
has been downgraded to a hold from a buy. The company's return on equity in the first quarter of fiscal 2007 was just 10.4%, less than half the textiles, apparel and luxury industry average. Kenneth Cole's stock price has declined over the past year, losing 4.7% of its value. KCP had been rated a buy since April 2007.
Some recent rating changes are highlighted below.