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, 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.
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.
, an offshore oil driller, has been rated buy since November 2005 on the basis of its record quarterly performance that benefited from favorable market conditions, heightening drilling activities worldwide and its return on equity, which has consistently improved over the last three years.
Third-quarter revenue climbed 40.8% over a year ago to $791.28 million, while net income increased 53.6% to $318.28 million, further supported by operating margin expansion. There has been heightened drilling and exploration activity recently, following the growing demand for oil and gas because of improving standards of life as well as an increase in automobile usage.
Noble's performance depends on the number of operational rigs in the market, which in turn is determined by the quantum of drilling activities, which are cyclical in nature. Oil and gas prices are highly volatile as well as cyclical and are at all-time high level. Any price reversal could affect the number of operational rigs, and that could hurt profitability.
Air Products and Chemicals
, a chemical and gas producer, has been rated a buy since August 2005 on the basis of its strong revenue growth, expanding margins and increased net income, coupled with a notable return on equity. Higher pricing and volumes across various business segments have supported the revenue growth.
Fiscal-year fourth-quarter profit increased 128% over a year ago, led by higher net sales, to $292.80 million or $1.31 a share. Sales climbed by 10.3% to $2.60 billion. The company plans to expand margins and to continue to reduce costs across all its businesses, with the goal of achieving an improvement of 100 basis points in margins in fiscal 2008.
Risks to the company's performance include high competition from several large global competitors. Also, unfavorable effects of currency fluctuations may adversely affect the top line of the company.
produces electricity using natural gas, wind, nuclear, oil, hydro and other resources. It has been rated a buy since December 2005. Excluding charges, FPL Group posted a third-quarter profit of $493 million, or $1.23 a share, compared with $460 million, or $1.15 a share, a year ago.
FPL Group has been expanding its energy infrastructure, diversifying its fuel mix from natural gas toward wind and nuclear power because of growing concern about greenhouse emissions and rising commodity prices. Management projects earnings to be near the higher range of $3.35 to $3.45 a share for fiscal 2007, up from $3.23 a share in fiscal 2006. In addition, it has raised its earnings projection for fiscal 2008 by 10 cents a share to a range of $3.70 to $3.90 a share.
The company's shares have risen by about 33% over the past year. While the stock is relatively expensive compared with the rest of its industry, TheStreet.com Ratings believes FPL's other strengths justify these higher price levels.
L-3 Communications Holdings
, a military-equipment company, has been rated a buy since November 2005. Third-quarter net income rose 21% over a year ago to $199 million. 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% to $1.56, 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 $5.86 to $5.90 a share, up from an earlier range of $5.72 to $5.82 a 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.
, whose businesses include making Cessna airplanes and Bell helicopters, has been rated buy since January 2006 on the basis of its impressive growth in revenue, net income and return on equity. These strengths are also supported by the company's sound cash position, strong guidance and encouraging business development initiatives.
Third-quarter profit climbed 51% over a year ago to $255 million, or $1 a share. The company raised its full-year 2007 revenue guidance to $13 billion, which would represent an increase of 13.3% over fiscal year 2006r. Management also forecasts EPS from continuing operations to be in a range of $3.40 to $3.50, up 22 cents a share from the prior expectations. Textron agreed to acquire aeronautics and defense company
for about $1.10 billion.
The company has agreed to jointly bid on an Army contract to build light armored vehicles with aircraft maker
. On the risk side, Textron is highly leveraged, and it faces contractual risks with the U.S. government.