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Each business day, 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.

Brown Shoe


, a footwear retailer, has been downgraded to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and expanding profit margins. However, Brown Shoe has also been struggling with disappointing return on equity, weak operating cash flow and a generally disappointing stock performance.

Third-quarter net income totaled $27 million, or 61 cents a share, up slightly from $26.9 million, or 62 cents a share, a year ago. Excluding items, net income totaled 67 cents a share. Revenue slipped 5% to $645.5 million. Brown Shoe also reduced its 2007 guidance. Return on equity is significantly below the industry average. Brown Shoe had been rated buy since December 2005.

Emerson Radio


, an electronics retailer, has been downgraded to sell because of several factors, including its deteriorating net income, disappointing return on equity, poor profit margins, unsatisfactory historical stock performance and feeble EPS growth.

The company swung to a second-quarter loss of $3.3 million or 12 cents a share, compared with net income of $3.8 million, or 14 cents a share, a year ago. Revenue totaled $57.9 million, down from $99.6 million a year ago. Return on equity was down significantly over the same period. Emerson Radio's stock has tumbled by about 55.63% over the last year. While the stock's sharp decline is a positive for future investors, Ratings believes that it is not a good buy right now because of other concerns. Emerson Radio had been rated hold since July.



, which makes coatings and paints, has been downgraded to hold. While the company has experienced revenue growth is attractively valued, it has also struggled with deteriorating net income, disappointing return on equity and poor profit margins.

Fourth-quarter income slipped 13% from a year ago to $45.4 million, or 45 cents a share, significantly below the industry average. Sales increased 9% to $852.8 million. Valspar has reported a trend of declining EPS over the past year, but the consensus estimate suggests that this trend should reverse in the coming year. The company's current return on equity has slightly decreased from the same quarter one year prior. Valspar had been rated buy since December 2005.

McCormick & Co.


, a specialty food company, has been upgraded to buy. The company maintains a largely solid financial position with reasonable debt levels by most measures, its revenue and EPS growth, increase in net income and notable return on equity. These strengths should outweigh the lackluster performance in the stock itself.

Third-quarter net income increased by 32% from a year ago to $56.8 million, or 43 cents a share. Revenue increased 8% to $716.2 million. This company has reported somewhat volatile earnings recently, but Ratings believes it is poised for EPS growth in the coming year. Last month, McCormick said it had agreed to agreed to buy

Unilever Group's

Lawry's business for $605 million. McCormick & Co. had been rated hold since October.

PNM Resources


, an energy company, has been downgraded to hold. The company has a solid financial position based on a variety of debt and liquidity measures, but it is also marked by a generally disappointing stock performance, unimpressive growth in net income and unsatisfactory return on equity.

Third-quarter net income tumbled 80.5% from a year ago to $8.50 million, or 11 cents a share. Revenue fell 3% to $629.4 million. Over the last year, PNM Resources' stock has fallen by 25.70%; nevertheless, investors should not assume that it can be tagged as cheap and attractive. The reality is that on the basis of its current price in relation to its earnings, PNM is still more expensive than most of the other companies in its industry. PNM Resources had been rated buy since December 2005.

Additional ratings changes are listed below.