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 company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
has been downgraded to hold following disappointing second-quarter results. However, the company's strategic long-term growth initiatives and above-average shareholder returns are notable. Second-quarter sales were stagnant at $1.05 billion, as growth in the dark and premium chocolate segment was offset by increased competition in the refreshment segment. Hershey has been launching new products, and it recently entered into joint ventures in India and China. The company had been rated a buy since July 2005.
, the world's second-biggest maker of liquid crystal displays, has been upgraded to hold. Revenue has grown, there is good cash flow from operations and the company's stock price has performed solidly. However, LG.Philips has also seen deteriorating net income, disappointing return on equity and poor profit margins. Earlier this month, the company swung to a second-quarter profit and sales climbed 45% to $3.65 billion. Gross profit margin has been rather low. The company had been rated a sell since June.
has been upgraded to buy. The company has a largely solid financial position, with strong revenue growth and good cash flow from operations. These strengths should outweigh its somewhat disappointing return on equity. Southwest Airlines saw second-quarter earnings fall 17% due to rising fuel costs, a difficult pricing environment and an exceptionally strong performance in the year-ago quarter. The company offered buyouts to one-fourth of its employees and delayed delivery of some jets from
. Southwest Airlines has been rated a hold since June.
CNH Global NV
, which makes agricultural and construction equipment, has been upgraded to buy. The company's stock price has performed solidly and it has posted impressive growth in revenue, earnings per share and net income with a notable return on equity. These factors should outweigh the company's generally poor debt management. Earlier this week, CNH Global said second-quarter earnings jumped 55% due to strong farm equipment sales. Revenue increased 17% to $4.32 billion. The company had been rated a hold since February 2006.
Additional ratings changes are listed below.