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 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 62 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.
acquires, develops, exploits and explores oil and gas properties. The company also produces, processes, markets and transports oil and natural gas. Its proved reserves are located primarily in various regions of Alaska, Arkansas, Colorado, Kansas, New Mexico, Oklahoma, Texas, and Wyoming. These fields are generally long-lived, with well-established production histories.
We have rated XTO a buy since November 2001. Its strengths include revenue growth, solid stock performance, and an increase in net income. Boosted by increased oil and natural gas production as well as higher energy prices, fourth-quarter net income rose 8.2% to $464 million, or 95 cents a share, from $429 million, or 92 cents a share, a year ago. Revenue rose 33% to $1.59 billion, vs. $1.2 billion in the fourth quarter of 2006. Finally, XTO witnessed record production led by broad-based growth across all basins.
The company recently agreed to acquire $1 billion worth of oil and gas properties, which could help it reach significantly higher production and reserve targets. Looking ahead, the company raised its 2008 production growth target to 20%, up from its previous target of 18%. Bear in mind, however, that there are risks to our buy rating; oil and gas prices are highly volatile and cyclical in nature
, a publicly owned investment manager, has been rated buy since December 2005. Its products include a variety of fixed income, cash management, equity and alternative investment separate accounts and mutual funds.
The company is reaping substantial benefits from its September 2006 merger with Merrill Lynch Investment Managers (MLIM) and the October 2007 acquisition of the fund of funds business of Quellos Group, LLC, which have allowed it to become one of the world's largest asset management firms. The beneficial impact of these business combinations is reflected in the firm's cross-selling successes, which supported its top-line growth throughout fiscal 2007.
The company reported robust results for the fiscal year 2007 on Jan. 17, with assets under management up 21% over 2006, standing at $1.36 billion as of the end of the year. Along with the acquisition of the Quellos business, this helped drive revenue growth of 42% for the quarter and 131% for the year. The firm continues to focus on product diversification and has adopted stricter risk-management procedures to mitigate damage from current turmoil in the credit markets. Management feels that this focus will enable the company to grow despite current challenging market conditions.
Our rating is subject to the risk of any unexpected downturn in the securities markets or the economy in general, any deterioration in relative investment performance, and any adverse regulatory developments. Furthermore, slowing trends in the U.S. economy and fluctuations in interest rates could adversely affect the company's performance.
is a medical products and services company, providing medical devices, pharmaceuticals, and biotechnology for the treatment of a variety of diseases including hemophilia, cancer, and kidney disease. The company manufactures products in 28 countries and sells them in over 100 countries, with more than 50% of its revenues generated outside the U.S.
In addition to a 10% year-over-year increase in earnings for the fourth quarter, Baxter's plans for strategic expansion are a positive sign. The company recently entered into an agreement with
to apply Halozyme's proprietary Enhanze technology in Baxter's treatment of immunodeficiency disorders. Baxter also signed an agreement with Japan-based Kaketsuken to develop a treatment for rare blood disorders and received premarket notification clearance from the U.S. Food and Drug Administration for its V-Link Luer-activated Device with VitalShield protective coating. This product is designed to reduce contamination of IV fluids.
Looking ahead to 2008, the company expects earnings per share before items to range from $3.10 to $3.18 per share on sales growth of 5.0% to 6.0%, excluding foreign exchange transactions. However, potential delays in regulatory approvals or an unfavorable market response to the company's products could affect this stock. Pricing pressure from generic competitors is another area of concern.
provides a variety of communications, intelligence, surveillance, and reconnaissance-related services, primarily in the U.S. Customers include the Department of Defense, the Department of Homeland Security, various other U.S. government departments and agencies, allied foreign government ministries of defense, and commercial customers.
The buy rating on this stock is based primarily on expected benefits from a higher defense budget, an impressive bottom-line performance in the fourth quarter of 2007, and strong fundamentals. For the fourth quarter, L-3 recorded 20% year-over-year growth in net income. This increase was fueled by robust top-line growth, operating margin expansion and essentially flat interest expense. Because the company ranks among the top ten largest federal contractors, it is well positioned to benefit from current government spending on defense and homeland security. The company could also see an increased demand for its baggage-screening and surveillance systems due to higher security measures at airports.
Looking forward, management raised guidance for the first quarter of 2008 to between $6.48 and $6.62 a share, up from an earlier view of $6.41 to $6.55 a share. This boost was based mainly on the company's healthy backlog position and a favorable industry outlook. It is important, however, to keep in mind that the company is heavily dependent on government spending, so any change in current trends or loss of key contracts could adversely affect the stock.
is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. The company has interests worldwide in countries such as Argentina, Australia, Canada, China, Egypt, the United Kingdom, and the United States.
Apache has been rated a buy since January 2003. The company's earnings for the fourth quarter of 2007 more than doubled, fueled by record energy prices and an 8% jump in production. Net income rose to $1.07 billion, or $3.19 per share, vs. $520.8 million, or $1.56 share, a year ago. Total revenue surged 53% to $3.01 billion from $1.97 billion, driven by record production and strong commodity prices.
Looking forward to 2008, the company anticipates rising natural gas prices in Australia on growing demand in the domestic mining industry, as well as the liquefied natural gas export market. Apache's future performance depends, however, on its ability to achieve positive results from previous acquisitions. The company also faces challenges from increasing debt levels and comparatively low shareholder returns.
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.