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 forecasted company earnings. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
Some recent rating changes are highlighted below.
has been upgraded to a buy from a hold. Revenue was up 6.6% in the first quarter of fiscal 2007 compared with the same quarter a year earlier. This growth appears to have trickled down to the bottom line, where earnings per share increased by 13% over that same time period. Investors seem to have taken notice of these positive developments, pushing Merck's stock price up 45.7% in the past 12 months. The drugmaker had been rated a hold since November 2006.
has been downgraded to a hold from a buy. The company owns and operates Webster Bank, the National Association bank and Webster Insurance. Earnings per share fell 24.4% in the first quarter of fiscal 2007 compared with the same quarter a year earlier. Webster Financial's return on equity is currently lower than the thrift and mortgage finance industry average. The company's stock price has remained relatively flat over the past year. WBS had been rated a buy since January 2007.
has been boosted to a buy from a hold. The company has demonstrated a pattern of positive earnings growth over the past two years. TheStreet.com Ratings believes Xilinx's gross profit margin is rather high at 63.3%. Meantime, the company has no debt to speak of and appears to be able to cover short-term cash needs. Xilinx had been rated a hold since December 2006.
has also been upgraded to a buy from a hold. The company makes chip-test systems for use in automotive, communications and computer applications. TheStreet.com Ratings feels Teradyne is in a solid financial position with reasonable debt levels and a high gross profit margin. The stock price has shot up 10.6% over the past three months, but the company's price-to-earnings ratio still trails the industry average. TER had been rated a hold since April 2005.
Greeting card manufacturer
has been downgraded to a hold from a buy. The company's revenue and net income were down in the fourth quarter of fiscal 2006 compared with the same quarter a year earlier. In terms of earnings, American Greetings swung to a loss in the most recent quarter, giving up 14 cents per share after EPS of 80 cents in the third quarter. The company's return on equity is just 4.3%, well below the household durables industry average. American Greetings had been rated a buy since September 2006.
Additional ratings changes are listed in the table below.