Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- 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 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks 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.
is the world's sixth-largest food company, producing packaged consumer foods that are marketed in more than 100 countries. We have rated it a buy since November 2004.
For the first quarter of fiscal 2009, the company reported that it achieved strong results, primarily due to strong consumer demand in worldwide markets. First-quarter revenue rose 13.8% year over year, but this revenue does not appear to have trickled down to the company's bottom line, and General Mills displayed a decline in earnings per share for the quarter. However, we feel that the company is poised for EPS growth in the coming year, despite reporting somewhat volatile earnings recently. Net sales grew 14% from, $3.1 billion in the first quarter of fiscal 2008 to $3.5 billion in the most recent quarter. Net operating cash flow also increased significantly, rising 1,007.35% when compared to the same quarter last year. In addition, we consider the company's 37.30% gross profit margin to be strong.
Management was pleased with what it considered to be a great start to fiscal 2009, as sales and profit results for the first quarter exceeded management's expectations. General Mills increased its earnings guidance for fiscal 2009 to a range of $3.81 to $3.85 per share, up from its previously released forecast of $3.78 to $3.83 per share. The company also expects fiscal 2009 net sales to grow at a mid single-digit rate. Although the company's growth in net income has been sub par, we feel that its strengths outweigh any weaknesses it may display. Even the best stocks can fall in an overall down market, but in any other environment, we believe that this stock still has good upside potential despite the fact that it has already risen in the past year.
primarily operates and franchises McDonald's restaurants. In total, the corporation has more than 30,000 restaurants in more than 100 countries. We have rated it a buy since March 2004, based on strengths such as its expanding profit margins and growth in net income, revenue.
On Oct. 22, the company reported that global comparable sales growth of 7.1% year over year fueled strong results in the third quarter of fiscal 2008. Revenue increased 6.2% when compared with the prior year's quarter. Although this trailed the industry average of 23.2%, it appears to have led to EPS growth. EPS improved 26.5%, rising from 83 cents in the third quarter of fiscal 2007 to $1.05 in the most recent quarter. Although McDonald's reported earnings have been somewhat volatile recently, we feel that it is poised for EPS growth in the coming year. Net income increased by 11.2% when compared to the same quarter a year ago. In addition, we consider the company's 37.7% gross profit margin to be strong, especially as it has managed to decrease from the same period last year and compares favorably to the industry average of 19%.
Management was pleased with its reported higher margin dollars, comparable sales, and a double-digit operating income increase. The company plans to continue its focus on disciplined financial practices in order to continue driving strong financial performance in the future. Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from McDonald's generally positive outlook.
Procter & Gamble
and its subsidiaries markets over 300 branded products in more than 160 countries. Popular brands include Pampers, Tide, Ariel, Pantene, Wella, Always, Crest, Bounty, Charmin, Olay, Pringles, Iams, Downy, Actonel, Folgers and Head & Shoulders. Procter & Gamble has been rated a buy since October 2002. Our recommendation is based on the company's revenue growth, increase in net income, notable return on equity, and good cash flow from operations. These strengths are further supported by P&G's EPS growth.
For the first quarter of fiscal 2009, the company reported earnings growth of 8.7% year over year, as earnings rose to $3.35 billion, or $1.03 per share. Earnings per share increased 11.9% when compared to the same quarter last year, continuing a trend of positive EPS growth that we feel should continue in the future. P&G's revenue growth of 9% slightly outpaced the industry average of 8.8%. This growth was supported by favorable foreign exchange rates and a 5% increase in organic sales. Return on equity improved slightly from 15.63% in the first quarter of fiscal 2008 to 18.8% in the most recent quarter and can therefore be considered a minor strength for P&G. Net operating cash flow remained constant at $3.25 billion.
Looking ahead to the second quarter of fiscal 2009, Procter & Gamble anticipates sales growth of about 4% as a result of pricing and product mix, with organic sales expected to grow 4% to 6%. P&G expects earnings to be in the range of $1.45 to $1.50 per share. In addition, the company increased its full fiscal year 2009 EPS to a range of $4.15 to $4.25 per share. However, the company faces risks from rising commodity and energy costs, as well as the increasing volatility in foreign exchange markets. These factors could negatively impact P&G's future financial results.
is one of the nation's largest grocery retailers. Our buy rating for Kroger has been in place since March 2006. Although the company has generally had poor debt management, we feel that the rating is justified due to strengths such as the company's EPS growth, revenue growth and increase in net income.
For the second quarter of fiscal 2008, the company reported revenue growth of 11.9% year over year. This growth appears to have trickled down to the company's bottom line, helping to boost EPS by 10.5%. EPS rose from 38 cents in the second quarter of fiscal 2007 to 42 cents in the most recent quarter. Net income also grew during the second quarter, improving 3.5% from $2.76 billion to $2.77 billion.
Management credited its Customer 1st strategy as the basis for its ability to create value for its shareholders. Because of its year-to-date results and management's outlook for the remainder of the fiscal year, Kroger raised its identical sales guidance for fiscal 2008 to a range of 4.5% to 5.5%, excluding fuel. The company confirmed its earnings guidance of $1.85 to $1.90 per diluted share. The company had previously released earnings guidance of $1.83 to $1.90 per diluted share. While Kroger's share price has dropped recently, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of the past year's decline.
is a medical products and services company, providing medical devices, pharmaceuticals and biotechnology for the treatment of a variety of diseases including hemophilia, cancer, and kidney disease. Baxter has been rated a buy since May 2005, based on such positive investment measures as EPS growth, revenue growth, good cash flow from operations and expanding profit margins.
The company reported on Oct. 16 that its results in the third quarter of fiscal 2008 compared well with its previously posted guidance. Although the results were less than the industry average of 18.2%, revenue growth of 14.6% year over year appears to have helped fuel EPS growth. EPS improved 21.3% in the most recent quarter when compared to the third quarter of fiscal 2007, rising from 61 cents to 74 cents. In fact, the company has demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. Net income also increased, rising from $395 million a year ago to $472 million. Baxter's global sales increased 15.0% year over year to $3.2 billion due to strong performance from the company's international business. The return on equity also improved slightly when compared to the same quarter last year, which can be construed as a modest strength for Baxter.
Based on its strong sales and earnings in the third quarter, Baxter provided fourth quarter guidance for the first time and raised its full-year 2008 earnings outlook. While the company reaffirmed its expectation for sales growth in the range of 5% to 6% for the full year, it announced that it now anticipates full year earnings per diluted share of $3.35 to $3.37. Fourth quarter guidance was given as sales growth of approximately 7% and earnings per diluted share of 88 cents to 90 cents. Although the company may harbor some minor weaknesses, we do not believe that any of these are likely to have a significant impact on the company's future results.
Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe a rating alone cannot tell the whole story and should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.