Each weekday, 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, updated daily, 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. 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.
Today's list leads off with
, which makes complex metal components and products for the aerospace and industrial gas turbine industries. It has been rated a buy since June 2005.
The company has completed recent acquisitions to expand its casting, forging and fastener product offerings, and that should fuel revenue growth. Precision also shows net income increases resulting from margin expansion and higher income from continued operations (which were partially offset by higher interest expenses and taxes).
Since Precision depends on the aerospace industry for its top-line growth, any slowdown in that industry could lead to reduced demand for its products. Any fluctuations in the prices of basic materials or any unseen difficulty in integrating recent acquisitions could also be concerns.
Oilfield services company
has been rated a buy since June 2005. The company has demonstrated a pattern of positive EPS growth over the past two years, a trend TheStreet.com Ratings expects to continue. Its net income increased by 63.4% in the first quarter of 2007 when compared to the same period last year, outperforming both the
and its industry. Schlumberger also shows a strong gross profit margin and improved return on equity, a clear sign of strength within the company.
Although Schlumberger may harbor some minor weaknesses, they are unlikely to have a significant impact on results.
mines, smelts and refines copper in southern Peru. It has earned a buy rating since July 2005.
The company has benefited from higher metal prices, which have translated into strong revenue and net income increases. Net income growth was further driven by expanded operating margins, lower net interest expenses and a decline in the effective tax rate. The positive trend in net income has contributed exceptional return-on-equity. Southern Copper also has a strong project pipeline, with plans to increase copper output by 100,000 tons by 2009.
The principal risk to the rating comes from any undue delay in the completion of the company's capacity expansion and new mine projects. Also, copper supply could be affected by labor strikes and the availability of mining equipment.
Deere & Co.
has been rated a buy since June 2005. It recently completed the acquisition of LESCO, a leading supplier of lawn care, landscape, golf course and pest control products, which doubled the number of wholesale distributor locations for its landscaping equipment. The company is well positioned to benefit from the surge in corn production, driven by increased demand for ethanol, which could compel farmers to buy more equipment.
Deere's second-quarter revenue was up 4.9% over the year-earlier period due to strong international demand for farm machinery. However, net income decreased by 16.3% over the same period.
Risks include any adverse weather conditions, which could hurt farmers' products and income, leaving them with less money to spend on new equipment. Also, Congress begins negotiating a new farm bill this year that could reduce farm subsidies. This would also affect farmers' capital expenditures.
We conclude with
, which provides installed building control systems and technical and facility management services, passenger cars and light trucks and advanced battery technology. It has been rated a buy since June 2005. The company's revenue growth has powered strong increases in EPS, which in turn helped drive its stock price up 56.21% in the 12 months prior to July 15. Johnson Controls' second-quarter net income was up 38.2% on the year, significantly outpacing that of the auto components industry.
These strengths outweigh the company's generally poor debt management on most measures evaluated by TheStreet.com Ratings.