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.
, a homebuilding company, has been downgraded to sell. The company's weaknesses can be seen in several areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical stock performance. D.R. Horton swung to a third-quarter loss of $823.8 million, or $2.62 a share, from income of $292.8 million, or 93 cents a share a year ago. The results included pre-tax charges of $835.8 million for inventory impairments and $16.2 million related to write-offs on land options the company does not intend to pursue. Revenue totaled $2.5 billion, down from $3.6 billion a year ago. The stock has tumbled 45.8% over the last year. D.R. Horton had been rated hold since March 20.
has been downgraded to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and good cash flow from operations. However, the company's profit margins have been poor overall. Tyson swung to a third-quarter profit, earning $111 million, or 31 cents a share, compared with a loss of $52 million, or 15 cents a share, on revenue of $6.38 billion. Sales reached $6.96 billion, up from $6.38 billion a year ago. The stock is trading higher than a year ago, reflecting the market's overall trend and the fact that the company's earnings growth has been robust. The combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential. Tyson Foods had been rated buy since July.
, which provides storage and data management software, has been initiated with a hold rating. The company maintains a largely solid financial position with notable return on equity and robust revenue growth. However, earnings per share growth has been feeble and net income growth has been unimpressive. CommVault swung to a second-quarter profit of $3.4 million, or 8 cents a share, compared with a loss of $99.7 million, or $4.90 a share, a year ago. Revenue totaled $47.4 million, up from $36.6 million. Compared to other companies in the software industry, Commvault's return on equity significantly exceeds that of the industry average. The stock is now trading at a higher level than a year ago, and looking ahead, this company's fundamentals will probably not have much impact in either direction.
, a drybulk shipper, has been upgraded to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, solid stock price performance and compelling growth in net income. These strengths should outweigh the company's generally poor debt management. DryShips swung to a second-quarter profit of $110.2 million, or $3.11 a share, from a loss of $808,000, or 3 cents a share, a year ago. Revenue totaled $112.5 million, up from $54.5 million a year ago. The stock has surged over the last year and should continue to move higher. DryShips had been rated hold since April.
, a packaging manufacturer, has been upgraded to buy. The company enjoys a largely solid financial position, with a solid stock price performance, and impressive growth in revenue, EPS, and net income. These strengths should outweigh the company's low profit margins. MeadWestvaco posted third-quarter income of $121 million, or 66 cents a share, up from $56 million, or 31 cents a share, a year ago. Excluding items, the company earned 46 cents a share. Sales increased 3% to $1.80 billion. The stock's price rise over the past year has driven it to a level which is somewhat expensive compared to the rest of its industry, but TheStreet.com Ratings believes this company's other strengths justify these higher price levels. MeadWestvaco had been rated hold since May.
Additional ratings changes are listed below.