# 10 Top-Rated Defensive Stocks

BOSTON (

) -- Stocks tumbled yesterday as existing U.S. home sales dropped 27%. Here are 10 stocks in industries that typically withstand economic weakness. Although no company is immune to a downturn, food products, defense, tobacco and household products companies are best-suited to weather slow growth. The following stocks receive "buy" ratings from at least 70% of analysts covering their stocks. They are ordered by aggregate rating.

10.

**Scotts Miracle-Gro**

(**SMG**) - Get Report

sells lawn and garden care products. Fiscal third-quarter profit increased 19% to $176 million, or $2.59 a share, as revenue inched up 0.6%. The operating margin rose from 21% to 23%. Scotts has $79 million of cash and $690 million of debt, equaling a quick ratio of 0.8 and a debt-to-equity ratio of 0.8. Its stock trades at a PEG ratio, a measure of value relative to predicted long-run growth, of 0.3, a 70% discount to estimated fair value. Roughly 70% of analysts rate the stock "buy." A median target of $56.62 suggests a 17% return.

9.

**Energizer Holdings**

(**ENR**) - Get Report

sells batteries and flashlights. Fiscal third-quarter profit rose 43% to $104 million, or $1.47 a share, as revenue climbed 7.9% to $1.1 billion. The operating margin extended from 14% to 15%. Energizer has $489 million of cash and $2.4 billion of debt, converting to a quick ratio of 1.1 and a debt-to-equity ratio of 1.2. Its stock sells for a forward earnings multiple of 10 and a cash flow multiple of 6.6, 30% and 37% discounts to peer averages. Around 71% of researchers rate the stock "buy." A median target of $72.78 suggests 15% of growth.

8.

**Lorillard**

(**LO**)

sells cigarettes, including the Newport brand. Second-quarter net income dropped 8.1% to $263 million, but earnings per share inched up 1.2% to $1.73. Revenue ascended 0.3%. The operating margin narrowed from 44% to 43%. Lorillard has $1.8 billion of cash and $1.8 billion of debt. Its stock trades at a trailing earnings multiple of 12 and a forward earnings multiple of 11, 15% and 18% discounts to peer averages. Its PEG ratio of 0.9 signals a 10% discount to fair value. A median target of $88.62 implies 17% of potential upside.

7.

**United Technologies**

builds elevators, HVAC systems and helicopters. Second-quarter profit increased 14% to $1.1 billion, or $1.20 a share, as revenue grew 5.6% to $14 billion. The operating margin remained steady at 14%. United Technologies has $5 billion of cash and $12 billion of debt. Its stock sells for a forward earnings multiple of 13, a sales multiple of 1.2 and a cash flow multiple of 11, on par with industry averages. Of analysts covering United, 79% advocate purchasing its shares. A median target of $83.90 suggests a potential return of 26%.

6.

**Snap-on**

(**SNA**) - Get Report

makes hand and power tools. Second-quarter profit expanded 21% to $45 million, or 78 cents a share, as revenue grew 7.5%. The operating margin remained steady at 13%. Snap-on has $431 million of cash and $923 million of debt, translating to a quick ratio of 1.6 and a debt-to-equity ratio of 0.7. Its stock trades at a forward earnings multiple of 11 and a book value multiple of 1.9, 35% and 38% discounts to machinery peer averages. Roughly 80% of analysts rate the stock "buy." A median target of $56.83 implies 34% of upside.

5.

**Philip Morris International**

(**PM**) - Get Report

sells cigarettes outside the U.S. Second-quarter profit increased 28% to $2 billion, or $1.07 a share, as revenue grew 15% to $7.1 billion. The operating margin declined from 42% to 41%. Philip Morris International has $1.6 billion of cash and $15 billion of debt, equaling a quick ratio of 0.5 and a debt-to-equity ratio of 3.7. Its stock sells for a PEG ratio of 0.8, a 20% discount to estimated fair value. Of analysts covering the stock, 81% rate it a "buy." Researchers' median target of $56.64 suggests a potential return of 10%.

4.

**General Mills**

(**GIS**) - Get Report

makes food products. Fiscal fourth-quarter profit fell 41% to $212 million, or 31 cents a share, as revenue declined 2.1% to $3.6 billion. The operating margin narrowed from 20% to 13%. General Mills has $678 million of cash and $6.4 billion of debt, converting to a quick ratio of 0.5 and a debt-to-equity ratio of 1.2. Its stock trades at a forward earnings multiple of 13 and a cash flow multiple of 11, 12% and 9% discounts to industry averages. Around 81% of researchers rate the stock "buy." A median target of $40.50 implies 14% of potential growth.

3.

**LMI Aerospace**

(**LMIA**)

sells engineering services and components to aerospace and technology companies. Second-quarter profit ascended 4% to $3.3 million, or 29 cents a share, as revenue declined 11%. The operating margin rose from 8.7% to 9.8%. LMI has $330,000 of cash and $4.6 million of debt. Its stock sells for a forward earnings multiple of 10, a book value multiple of 1.2 and a cash flow multiple of 4.4, 27%, 74% and 57% discounts to peer averages. Roughly 83% of analysts rate the stock "buy." A median target of $22.25 suggests a 46% return.

2.

**Archer-Daniels-Midland**

(**ADM**) - Get Report

procures, processes and stores agricultural commodities. Fiscal fourth-quarter profit multiplied to $446 million, or 69 cents a share, from $58 million, or 9 cents, a year earlier. Revenue decreased 5%. The operating margin widened from 0.3% to 3.8%. ADM's stock trades at a forward earnings multiple of 9.6, a book value multiple of 1.3 and a cash flow multiple of 7.2, 35%, 65% and 39% discounts to peer averages. Around 85% of analysts rate the stock "buy." A median target of $36.36 implies 22% of growth.

1.

**Orbital Sciences**

(**ORB**)

makes rockets and space systems. Second-quarter profit dropped 27% to $6.4 million, or 11 cents a share, as revenue increased 25%. The operating margin fell from 4.8% to 4.1%. Orbital has $243 million of cash and $123 million of debt, equaling a quick ratio of 1.6 and a debt-to-equity ratio of 0.2. Its stock sells for a forward earnings multiple of 11 and a book value multiple of 1.4, 19% and 70% discounts to peer averages. All 8 analysts following Orbital rate its stock "buy." A median target of $23.80 suggests an 83% return.

-- Written by Jake Lynch in Boston.

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