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
var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 1379238794; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);
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 third-quarter revenue grew by 14.3% over a year ago to $5.03 billion, aided by an increase in wholesale and retail electric sales from its generation division. Exelon swung to a net profit of $780 million, or $1.15 per share, from a loss of $44 million, or 7 cents a share, over the same period. Income growth came from higher margins on energy sales, higher nuclear output and favorable weather.
In December, the company increased its first-quarter dividend 14%. 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. Exelon's margins are declining and debt balances are high, which could affect its operations in the coming quarters.
, 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.
, an integrated energy company, has been rated a buy since December 2005. The company's stock price went up by 16.8% in the 12 months prior to Dec. 17, and although even the best stocks can fall in an overall down market, in any other environment, the stock still has good upside potential.
Third-quarter earnings rose 25.7% to $2.30 a share, up from $1.83 a share during the same period last year. Entergy has demonstrated a pattern of positive EPS growth over the past two years and this trend is expected to continue. Revenue increased 1.1% to $3.29 billion. The company also displays attractive valuation levels and a notable return on equity. These strengths outweigh the fact that the company has had generally poor debt management on most measures evaluated by TheStreet.com Ratings.
Emerson Electric Co.
, a diversified technology company, has been rated a buy since December 2005. Fourth-quarter revenue increased 11% to $6.13 billion, driven by double-digit sales growth from three of its five segments. Net income increased 18% to $623 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 the return on equity and assets, with ROI expanding 172 basis points to 24.35% and return on assets improving to 10.85% from 9.88%.
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.
Air Products and Chemicals
, a chemical and gas producer, has been rated a buy since December 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, due to higher pricing and volumes in the merchant gases segment and higher volumes in its tonnage gases and electronics and performance materials segment.
Air Products and Chemicals faces risk from high competition from several large, global competitors. Furthermore, unfavorable effects of currency fluctuations may adversely affect the top line of the company.
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 that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.