TSC Ratings' Updates: Bristol-Myers

Bristol-Myers, Kinross Gold, Medco Health and SAIC are upgraded; Jefferies is downgraded.
Author:
Publish date:

The following ratings changes were generated on Tuesday, Dec. 23.

We've upgraded pharmaceutical company

Bristol-Myers Squibb

(BMY) - Get Report

from hold to buy, driven by its revenue growth, compelling growth in net income, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue rose by 14.2% since the same quarter last year, outpacing the industry average of 10.3% growth, though EPS declined. Bristol-Myers' gross profit margin of 71.2% is very high, having increased from the same quarter a year ago, and it's net profit margin of 49.1% significantly outperformed the industry average. Net operating cash flow has significantly increased by 104% to $1,422.00 million, vastly surpassing the industry average cash flow growth rate of -23.44%. Net income increased by 200.5%, from $858 million to $2,578 million, significantly outperforming the

S&P 500

and the pharmaceuticals industry. Bristol-Myers' debt-to-equity ratio of 0.5 is low but is higher than that of the industry average. The company's quick ratio of 1.7 is high and demonstrates strong liquidity.

We've downgraded an investment bank and institutional securities company

Jefferies

(JEF) - Get Report

from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, generally weak debt management, disappointing return on equity and poor profit margins.

The company's debt-to-equity ratio is very high at 5.6 and currently higher than the industry average, implying very poor management of debt levels within the company. Return on equity has greatly decreased from the same quarter one year prior, a signal of major weakness within the corporation. Jefferies' gross profit margin of 25.9% is currently lower than what is desirable, having decreased significantly from the same period last year. Net income decreased by 180.7% compared with the same quarter a year ago, underperforming the S&P 500 and the capital markets industry.

Jefferies experienced a steep decline in earnings per share in the most recent quarter compared with the same quarter last year, continuing a two-year pattern of declining EPS that we anticipate should continue in the coming year. During the past fiscal year, the company reported lower earnings of 96 cents vs. $1.42 in the prior year. For the next year, the market is expecting a contraction in earnings to -$2.95.

We've upgraded

Kinross Gold

(KGC) - Get Report

, which engages in mining and processing gold and silver ores, from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue leaped by 82.6% since the same quarter last year, outperforming the industry's 69.2% average growth and improving EPS. Kinross' debt-to-equity ratio is very low at 0.17 and is currently below that of the industry average, implying very successful management of debt levels. Net operating cash flow has significantly increased by 146.1% to $206 million, vastly surpassing the industry average cash flow growth rate of -43.88%. Kinross' gross profit margin of 53.5% is rather high, having increased significantly from the same period last year, but its profit margin of 12.8% significantly trails the industry average.

EPS are up 42.9% in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Kinross increased its bottom line by earning 59 cents vs. 47 cents in the prior year.

We've upgraded pharmacy benefit management company

Medco Health Solutions

(MHS)

from hold to buy, driven by its revenue growth, impressive record of earnings per share growth, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue rose by 15% since the same quarter a year ago, outperforming the industry average of 3.6% and boosting EPS. Net income increased by 37.7%, from $214.8 million to $295.7 million, outperforming the S&P 500 and the health care providers and services industry. Net operating cash flow has significantly increased by 327.3% to $597 million, vastly surpassing the industry average cash flow growth rate of 50.1%. The debt-to-equity ratio of 0.8 is somewhat low and is below the industry average, implying a relatively successful effort in the management of debt levels. Its quick ratio of 0.8, however, is somewhat weak and could be cause for future problems.

EPS improved by 48.7% in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Medco Health increased its bottom line by earning $1.62 vs. $1.05 in the prior year, and this year, the market expects an improvement in earnings to $2.33.

We've upgraded

SAIC

(SAI)

, which provides scientific, engineering, systemsintegration and technical services and solutions, from hold to buy, driven by its revenue growth, growth in earnings per share, increase in net income, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue rose by 11.3% since the same quarter a year ago, outpacing the industry average of 9.8% and boosting EPS, which are up 7.4% in the most recent quarter compared with the same quarter last year. During the past fiscal year, SAIC increased its bottom line by earning 94 cents vs. 40 cents in the prior year, and this year, the market expects further improvement to $1.09. Net income growth of 14.3% compared with the same quarter a year ago significantly exceeded that of the S&P 500 and the IT services industry. ROE has improved slightly, which can be construed as a modest strength in the organization.

Other ratings changes include

Kirby Group

(KEX) - Get Report

, downgraded from buy to hold, and

Presitge Brands Holdings

(PBH) - Get Report

, upgraded from hold to buy.

All ratings changes generated on Dec. 23 are listed below.

Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates. While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows. 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 a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.