Each week, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list, last updated Nov. 23, is based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors.
The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
L-3 Communications Holdings
, a military-equipment company, has been rated a buy since October 2005. Third-quarter net income rose 21% over a year ago to $199 million, or $1.56 a share. Revenue increased by 11.1% to $3.45 billion during the same period, outpacing the industry average of 8.5%. L-3's earnings per share grew by 19.1% and the company's stable EPS growth over the past year indicates that it has sound management over its earnings and share float. Its net operating cash flow rose 24.41% to $324.10 million during the third quarter compared with the same period last year.
Encouraged by a strong performance during the first nine months of 2007, a healthy backlog position and a favorable industry outlook, L-3 Communications raised fiscal 2007 guidance to be in the range of $5.86 to $5.90 a share, up from an earlier view of $5.72 to $5.82 share. The company also said it expects 2008 earnings to be within the range of Wall Street's expectations. Though the company's stock price has risen in the last 12 months, it should continue to move higher.
has been rated a buy since October 2005. The company's diversified business model and growth initiatives leave it well-positioned to gain from positive trends in the railroad industry. Third-quarter profit climbed 27% over a year ago to $532 million, or $2 a share. Revenue climbed 5% to $4.19 billion.
Union Pacific has a diversified business model and serves a broad range of customers, putting the company in a strong competitive position and making it less vulnerable to softness in the housing and auto industries. Tightness in trucking capacity due to driver shortage, increased highway congestion and higher fuel prices has resulted in higher demand for rail transport recently. Also, with double-stacked railcars and computer-guided systems, railroads are becoming more competitive than trucks.
On the down side, severe weather, currency volatility and higher-than-expected fuel prices could hurt Union Pacific's financial performance, and a recent change in Illinois tax law could increase the company's future income tax liability.
, which makes motion and control technologies and systems, has been rated a buy since October 2006. Its fiscal first-quarter net income increased 9% from a year ago to $229.60 million or $1.33 a share, bolstered by strong sales growth in its industrial, international and aerospace segments. Revenue increased by 9.2% to $2.79 billion over the same timeframe, driven by a mix of organic growth, strategic acquisitions and positive foreign currency exchange rates.
Parker-Hannifin's return on equity climbed 217 basis points to 18.68%, and cash and cash equivalents rose 6.9% to $187.92 million. However, the company suffers from a declining operating margin as well as a high debt level. In addition, a significant portion of its revenue comes from customers outside the U.S., leaving it susceptible to adverse foreign policy and currency fluctuations.
, an integrated energy company, was initiated in January with a hold rating. The company has experienced a solid stock price performance and EPS and revenue growth, but its profit margins have been poor overall. Third-quarter net income increased 18.1% over a year ago to $467.53 million. EPS increased 25.7% in the most recent quarter and the company has demonstrated a pattern of positive EPS growth over the past two years. This trend is expected to continue.
The gross profit margin is currently lower than what is desirable, coming in at 33.20%, but it has nevertheless increased from the same period last year.
Stocks in the electric industry have been under pressure due to concerns about rising inflation, as the
will likely continue to raise interest rates. Increases in energy and purchased power costs are putting a squeeze on margins within this industry. Plus, many companies are increasingly feeling the impact of employee benefit programs and other costs associated with the future delivery of power.
( PCU) mines, smelts and refines copper in southern Peru. It has had a buy rating since November 2005. The company's earnings per share improved by 20.3% to $2.13 per share in the third quarter compared with the same period last year, continuing a two-year pattern of positive EPS growth. Net income grew 20.4% to $627.85 million mainly due to margin expansion and higher interest income. Revenue totaled $1.6 billion, up from $1.4 billion a year ago.
Management recently approved a new $2.11 billion investment plan to develop and expand various projects in Peru. The principal risk to the buy rating emanates from any undue delay in the completion of Southern Copper's capacity expansion and new mine projects. Copper supply could be affected by production stoppages due to labor strikes and the availability of mining equipment, as well as transportation bottlenecks.