Each business day, 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 is based on data from the close of the previous trading session. Today, all-around-value stocks are in the spotlight. These are stocks of companies that meet a number of criteria, including annual revenue of more than $500 million, lower-than-average valuations such as a price-to-sales ratio of less than 2, and leverage that is less than 49% of total capital.
In addition, they must 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.
is a global independent energy company that explores for, produces, purchases, transports and sells crude oil and natural gas. The company conducts exploration and production activities in countries worldwide, including the U.S., the U.K., Norway, Denmark, Equatorial Guinea, Gabon, Azerbaijan, Thailand and Indonesia. The company also manufactures, purchases, trades and markets refined petroleum and other energy products. Hess operates approximately 1,250 retail facilities in the eastern U.S., along with a convenience store network.
We have rated Hess a buy since August 2004 due to a variety of strengths. Propelled by price increases for natural gas, natural gas liquids and oil, the company's total revenue and non-operating income for the first quarter of fiscal 2008 rose 45% year over year. An increase in the company's average daily production of natural gas and crude oil also contributed to the improvement in total revenue and non-operating income. Hess also announced that its first quarter net income more than doubled to $759 million from $370 million a year ago, again due to higher crude oil prices and increased production. Additionally, net operating income increased significantly in the first quarter, rising 84% from the same quarter last year.
While oil prices are currently trading at record levels, these prices are also highly volatile and cyclical in nature. Because Hess generates a significant portion of its income from the production of oil and gas, any significant unexpected downturn in oil prices could negatively affect the company's earnings. Such a downturn could occur if high oil prices generate higher demand for low-cost alternatives or if the slowdown in the U.S. economy and weakness in the U.S. labor market put further pressure on the demand for oil and gas products.
is a global manufacturer of motion and control technologies. The company's products include fluid power systems, electromechanical controls and related components. The company also produces fluid purification, fluid control and fuel control, process instrumentation, air conditioning, refrigeration, electromagnetic shielding and thermal management products and systems. Parker-Hannifin's facilities are located in 36 states and 47 foreign countries.
Parker-Hannifin has been rated a buy since October 2006. We are optimistic about this company because of its healthy order growth, positive earnings outlook, and continued efforts to boost growth. Parker-Hannifin reported record results in sales, net income, earnings per share and cash flow from operations for the third quarter of fiscal 2008. Despite a challenging economic climate in North America, the company's net earnings improved 22% year over year, and revenue grew 14%. Earnings per share improved to $1.29 from $1.19 in the third quarter of 2007. The company also reported a 9% increase in total orders, including 28% and 11% growth in orders in the company's Aerospace and Industrial International segments, respectively.
The company continues to execute its Win Strategy, which includes enhanced customer service and a focus on improving profitability. We believe that this strategy could enable the company to maintain its financial strength. Additionally, Parker-Hannifin experienced healthy organic growth, aided by its expansion in the overseas market and the continued introduction of innovative products.
Looking ahead, management raised earnings guidance for fiscal 2008 based on third-quarter results. The company now anticipates income of $5.40 to $5.60 a share. However, while Parker-Hannifin has done well amidst recessionary trends facing North American industries, the impact of this trend could constrain the company's growth in the near future. Additionally, the company is susceptible to any adverse foreign policy and currency risks because a significant portion of its revenue comes from overseas customers.
is a worldwide oil and gas exploration and production company. It is headquartered in El Dorado, Ark. Murphy explores for and produces crude oil, natural gas and natural gas liquids worldwide, with refining and marketing businesses in North Africa and the U.K. In the U.S., Murphy produces oil and natural gas from six fields operated by the company and three operated by others. Murphy also conducts exploration and production operations in Canada, Malaysia, Ecuador and the United Kingdom.
Murphy Oil has been rated a buy since March 2003. The company's strengths include its healthy growth in net income and revenue, solid stock performance and impressive record of earnings-per-share growth. For the fourth quarter, the company reported year-over-year revenue growth of 91%, and net income increased 270%. The growth in net income was driven by higher crude oil prices and sales volume, while higher natural gas prices and an increase in the average daily production of natural gas and crude oil contributed to the improved revenue.
The company reported significant EPS growth to $2.14 from 58 cents a year ago, continuing its pattern of positive EPS growth over the past two years. Additionally, Murphy Oil's stock price has surged 47% over the past year.
It is important to remember that any unexpected sharp downturn in oil and gas prices could negatively affect Murphy Oil's earnings. In addition, oil prices, which are highly volatile and cyclical in nature, are trading at record levels and could be vulnerable to weaker economic conditions. High prices may also create heightened demand for low-cost alternatives, and could thus hurt overall demand for oil and gas products.
is a multinational energy company that maintains operations in more than 130 countries. Together with its subsidiaries, the company engages in all aspects of the petroleum industry, including both upstream (oil and gas exploration, development and production, liquefied natural gas) and downstream operations (refining, marketing, trading and shipping crude oil and petroleum products). The company also produces base chemicals such as petrochemicals and fertilizers, cholorochemicals, performance polymers and specialty chemicals for the industrial and consumer markets. Additionally, Total has interests in the coals mining and power generation.
Total has been rated a buy since September 2004, showing strengths in increased net income and revenue, solid stock performance, and a remarkable record of earnings per share growth. For the fourth quarter of fiscal 2007, Total's revenue grew 32% year over year, which in turn helped boost EPS to $2.48 from $1.50 in the fourth quarter of 2006. Additionally, the company has demonstrated positive EPS growth over the past two years. Net income increased 64% from the year-ago quarter.
As part of its policy to combat global climate change, Total launched a pilot program in 2007 to test new technology for the capture and sequestration of carbon dioxide. Also in 2007, the company signed a major agreement with Gazprom, worked to improve its refining and petrochemicals operations, and made further advances in alternative energies.
Total anticipates significant production growth in fiscal 2008 due to the ramp in production from Dolphin in Qatar and the commencement of production from several projects, including one in the U.K. and one in Congo. Bear in mind, however, that a number of risk factors could affect Total's future results, including fluctuations in currency or the price of petroleum products, environmental regulatory considerations, and general economic conditions.
manufactures steel products and is also one of the nation's largest recyclers of scrap metal. The company has facilities in 13 states and operates in two segments: Steel Mills and Steel Products. The Steel Mills segment produces both hot-rolled steel, manufactured from scrap, and cold-rolled steel made by further processing hot-rolled steel. The steel products segment produces items such as steel joists and joist girders, steel deck, cold-finished steel, steel fasteners, metal building systems and light gauge steel framing.
Our buy rating for Nucor has not changed since March 2004. For the first quarter of 2008, revenue rose 32% year over year to $4.97 billion. This increase was attributed to a 15% increase in average steel sales price per ton, an 11% increase in average steel products sales price per ton, and a significant increase in steel products shipments driven by acquisitions made in 2007. These factors and a strong global demand for steel also contributed to a 7.5% increase in first-quarter net income, less than the rise in revenue due to higher scrap steel costs.
Earnings per share rose as well due to Nucor's fiscal 2007 stock repurchases, which reduced the number of outstanding shares. The company continued its acquisition strategy in the first quarter, acquiring scrap processor David J. Joseph Company in February 2008. Nucor also recently bought Galamba Metals Group, which operates 16 scrap-processing facilities, and Metal Recycling Services. Finally, the company increased its base quarterly cash divided from 30 cents to 32 cents a share and approved the payment of a supplemental dividend of 20 cents a share.
According to the International Iron and Steel Institute, the global demand for steel is expected to rise 6.8% in 2008, and this positive industry trend should benefit Nucor. Looking forward to the second quarter of 2008, Nucor anticipates earnings in the range of $1.55 to $1.60 a share. Bear in mind, however, that any increases in scrap steel costs could negatively impact the company's margins and profitability, as could weak demand from the automotive and housing sectors.
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 impact 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.