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 specialty apparel retailer, has been downgraded to a sell. The company's weaknesses can be seen in several areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and a substandard stock performance.
Second-quarter profit dropped 44% to $18.28 million, while revenue inched up 1% to $770.9 million. The company also lowered its guidance for the third quarter and fiscal year. Net operating cash flow has decreased to $103.35 million or 11.39% from a year ago and Charming Shoppes' stock has tumbled about 53% over the last year. Charming Shoppes had been rated a hold since August 2006.
, a real estate investment trust, has been downgraded to a hold. While the company has seen expanding profit margins with revenue growth and increased net income, it has also been marked by a disappointing stock performance, poor debt management and an unsatisfactory return on equity.
Third-quarter net income available to common shareholders totaled $51.4 million, or 99 cents a share, up from $11.5 million, or 22 cents a share, a year ago. This company has reported somewhat volatile earnings recently, although it seems poised for EPS growth in the coming year. Funds from operations totaled $32.4 million, or 62 cents a share, up from $30.6 million, or 58 cents a share, a year ago. Total revenues from continuing operations for the quarter climbed 8% to $87.8 million. BRE Properties had been rated a buy since August 2006.
, another real estate investment trust, has been downgraded to a hold. Although the company has enjoyed good cash flow from operations and robust revenue and net income growth, it has also struggled with poor debt management and disappointing return on equity.
Third-quarter net income increased 319.4% from a year ago to $322.15 million, while funds from operations totaled $111.6 million, or 52 cents a share, up from $72 million, or 50 cents a share, a year ago. Revenue increased 136.2% to $284.2 million. (These figures include $1.24 million in revenue related to equity income from unconsolidated joint ventures.)
The company said it expects full-year funds from operations to be within the range of Wall Street's expectations. HCP's gross profit margin is rather high at 53%, although it is down from the same period last year. Health Care Property Investors had been rated a buy since October.
Royal Caribbean Cruises
has been upgraded to a buy. The company's strengths can be seen in several areas, such as its revenue growth, attractive valuation levels, increase in net income, good cash flow from operations and expanding profit margins. These factors should outweigh the company's somewhat disappointing return on equity.
Third-quarter profit climbed 14% from a year ago to $395 million, or $1.84 a share. Revenue totaled $2 billion, up from $1.6 billion a year ago. Net operating cash flow increased 50.2% to $336.91 million. While the company's profit margin is high, it decreased from the same period last year. Royal Caribbean Cruises had been rated a hold since May.
, a casino gaming machine maker, has been upgraded to a buy. The company boasts a solid stock price performance and expanding profit margins, along with growth in revenue, EPS and net income. These strengths should outweigh the company's generally poor debt management.
The company swung to a fiscal fourth-quarter profit, pulling in $18.5 million, or 33 cents a share, compared with a loss of $12 million, or 23 cents a share, a year ago. Revenue increased 31% to $202.4 million. This stock has surged 102.3% over the past year, and it should continue to move higher. Bally Technologies had been rated a hold since April 2006.
Additional ratings changes are listed below.