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, large-cap stocks are in the spotlight. These are stocks of companies that have market capitalizations of over $10 billion and 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 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.
Top Five Large-Cap Stocks
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, an offshore oil driller, has been rated a 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% on the year 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.
The stock is not risk-free. Noble's performance is dependent on the number of operational rigs in the market, determined by the quantum of drilling activities, which are cyclical in nature. In addition, oil and gas prices are highly volatile, as well as cyclical, and are currently at an all-time high level.
transmits and distributes electricity in northern Illinois, as well as electricity and natural gas in southeastern Pennsylvania. It has been rated a buy since January 2007. The company's revenue grew by 14.3% to $5.03 billion in the third quarter compared with the same period last year, aided by an increase in wholesale and retail electric sales from its generation division.
The company swung to a net profit of $780 million, or $1.15 per share, from a loss of $44 million, or seven cents a share, over the same period. Income growth came from higher margins on energy sales, higher nuclear output and favorable weather. Stockholders' equity edged up 7.3% to $10.51 billion, improving the company's debt-to-equity ratio.
However, any adverse change in commodity prices, an increase in capital expenditure, and unfavorable weather conditions could adversely impact the company's growth in the future. In addition, Exelon's margins are declining and debt balances are high, which could affect its operations in the coming quarters.
, a diversified technology company, has been rated a buy since December 2005. The company reported an 11.2% increase in third-quarter revenue to $6.13 billion, which was driven by double-digit sales growth from three of its five segments. Net income increased 18.4% to $574 million, or 78 cents a share, in the fourth quarter, driven by strong sales performance and a continued focus on cost reduction, which supported the margin. Higher net income boosted return on equity, which expanded 196 basis points to 23.43% in the fourth quarter compared with the same period last year, and return on assets, which improved 97 basis points to 10.85%.
On the downside, Emerson Electric operates in a highly competitive environment and that could affect prices or customer demand for its products. Any slowdown in the U.S. economy could pose a threat to the company's performance. In addition, the company is highly leveraged.
Public Service Enterprise Group
sells electricity and natural gas primarily in the northeastern and mid-Atlantic U.S. It has been rated a buy since November 2006. Third-quarter profit climbed 35.2% from a year ago to $507 million, or $1.97 a share.
Public Service Enterprise Group generates 67.6% of its operating income from its power segment, which grew 63.3% in the third quarter when compared with the same period last year. The growth was powered by higher prices realized, an increase in power generation and lower generation cost. The company has also seen an increase in generating capacity from its nuclear power plants.
The rating is not risk-free. Public Service Enterprise Group is exposed to risks arising from the reliability of power plants and transmission and distribution equipment, along with related safety hazards. In addition, the company could be negatively affected by regulatory changes.
produces electricity using natural gas, wind, nuclear, oil, hydro and other resources. It has been rated a buy since December 2005. The company's strong capacity addition plans, combined with improved margin, may lead to an impressive financial performance in the future.
FPL Group has been expanding its energy infrastructure to support growing energy demand. It is also diversifying its fuel mix from natural gas toward wind and nuclear power in response to concerns about greenhouse emissions and escalating commodity prices. The company projects its earnings for fiscal 2007 to be near $3.45 per share, compared with $3.23 a share in fiscal 2006. Management has also raised its earnings projection for fiscal 2008 to be in the range of $3.83 to $3.93 per share.
The company is exposed to risks rising from the reliability of its power plants as well as transmission and distribution equipment. Health and safety hazards connected with nuclear plants are also a potential risk. FPL Group also could be adversely affected by regulatory changes, higher fuel prices and weather fluctuations.
Our quantitative ratings are based on a variety of historical fundamental and pricing data and represent our opinion of a stock's risk-adjusted performance relative to other stocks.
However, they do not incorporate all of the factors that can alter a stock's performance.
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.