The following ratings' changes were generated on September 25.
has been upgraded from hold to buy. Carlisle Companies engages in the manufacture and sale of construction materials in the U.S. and internationally. It operates in five segments: construction materials, industrial components, transportation products, specialtyproducts, and general industry. The company's strengths can be seen in multiple areas, such as its increase in netincome, robust revenue growth, largely solid financial position with reasonable debt levels by most measures,notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact thatthe company shows low profit margins.
The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the
and exceeded that of the Industrial conglomerates industry average. The net income increased by 1.7% when compared with the same quarter one year prior, going from $53.40 million to $54.30 million.
Despite its growing revenue, the company underperformed as compared with the industry average of 19.5%.Since the same quarter one year prior, revenue rose by 16.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
The return on equity has improved slightly when compared with the same quarter one year prior. This can beconstrued as a modest strength in the organization. Compared with other companies in the industrialconglomerates industry and the overall market, CSL's return on equity exceeds that of both the industry average and the S&P 500.
CSL has improved earnings per share by 5.7% in the most-recent quarter compared with thesame quarter a year ago. The company has demonstrated a pattern of positive earnings per share growthover the past two years. However, we anticipate underperformance relative to this pattern in the comingyear. During the past fiscal year, CSL increased its bottom line by earning $3.39 vs. $2.87 inthe prior year. For the next year, the market is expecting a contraction of 15.2% in earnings ($2.88 vs. $3.39).
CSL had been rated a hold since June 2, 2008.
has been upgraded from hold to buy. EastGroup Properties, a real estate investment trust (REIT), focuses on the development, acquisition and operation of industrial properties in the U.S. Our rating is supported by the company's higher revenue, improved funds from operations and net income growth. These positives are countered by high leverage and declining total leased percentage. Although the company acquired new properties to earn more rental income, intense competition and the downturn in the U.S. real estate market present risks to futureprofitability.
During the second quarter of fiscal year 2008, EastGroup Properties' revenue grew 12.1% year over year to $41.59million, led by a 12.2% increase in income from real estate operations. Income from real estate operations was boosted by a 9.4% increase in rental rates on new and renewal leases. Meanwhile, property net operating income (PNOI) advanced 11.7% on the back of additional PNOI from newly developed properties as well as from acquisitions and same property growth.
FFO, for the latest second quarter, was $19.77 million or 80 cents per share, up 13.0% over the second quarter of fiscal year 2007 FFO, boosted by strong property operations results. Furthermore, as a result of a $1.95 million gain on sales of real estate investments and improved operating margin, net income spiked 58.9% year over year to $9.75 million or 29 cents per share.
Following impressive earnings growth, return on equity expanded 99 basis points to 6.46%, while return onassets widened 7 basis points to 3.11%. Furthermore, the company expanded its property portfolio by theacquisition of a 150,000 square foot building in Jacksonville, Fla. Additionally, the company acquired 12.2acres of land in San Antonio to construct three buildings.
Looking forward, the company expects third quarter fiscal year 2008 FFO to be in the range of 78 cents pershare to 82 cents per share and EPS of 25 cents to 29 cents per share. For fiscal year 2008, the company forecasts its FFO guidance to be in the range of $3.24 to $3.34 per share and EPS of $1.18 to $1.28.
Intense competition in the local real estate market and the downturn in the U.S. economy may adverselyaffect the company's rental income, a major source of revenue, in the upcoming quarters. In addition, highleverage and declining total leased percentage are significant downside risks.
EGP had been rated a hold since July 7, 2008.
has been downgraded from buy to hold. ADTRAN designs, develops, manufactures, markets and services network access solutions that enable voice, data, video, and internet communications for copper, fiber and wireless networks in the U.S. The company's strengths canbe seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debtlevels by most measures and growth in earnings per share. However, as a counter to these strengths, wefind that the stock has had a decline in price during the past year.
The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one yearprior, revenue slightly increased by 6.1%. This growth in revenue appears to have trickled down to thecompany's bottom line, improving the earnings per share.
Although ADTN's debt-to-equity ratio of 0.12 is very low, it is currently higher than that of the industryaverage. Along with this, the company maintains a quick ratio of 4.76, which clearly demonstrates the abilityto cover short-term cash needs.
The gross profit margin for ADTN is rather high; currently it is at 62.40%. It has increased from thesame quarter the previous year. Regardless of the strong results of the gross profit margin, the net profitmargin of 17.10% trails the industry average.
The return on equity has improved slightly when compared with the same quarter one year prior. This can beconstrued as a modest strength in the organization. Compared with other companies in the communicationsequipment industry and the overall market on the basis of return on equity, ADTN has underperformedin comparison with the industry average, but has exceeded that of the S&P 500.
ADTN's share price is down 9.55%, reflecting, in part, the market's overall decline, investors ignoring theincrease in its earnings per share. The fact that the stock is now selling for less than others in its industry inrelation to its current earnings is not reason enough to justify a buy rating at this time.
ADTN had been rated a hold since May 2, 2008.
had been downgraded from buy to hold. Computer Sciences provides information technology (IT) and business process outsourcing, and IT and professional services to the commercial and government markets. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and a generally disappointing performance in the stockitself.
CSC's revenue growth has slightly outpaced the industry average of 13.5%. Since the same quarter one yearprior, revenue rose by 15.6%. Growth in the company's revenue appears to have helped boost the earningsper share.
CSC has improved earnings per share by 29.5% in the most-recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CSC has increasedits bottom line by earning $3.24 vs. $2.28 in the prior year. This year, the market expects an improvement in earnings ($4.30 vs. $3.24).
The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average,implying that there has been a relatively successful effort in the management of debt levels. Although thecompany had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause forfuture problems.
The gross profit margin for CSC is rather low; currently it is at 18.80%. It has decreased from the same quarter the previous year.
The company's current return on equity has slightly decreased from the same quarter one year prior. Thisimplies a minor weakness in the organization. In comparison to the other companies in the IT Services industry and the overall market, CSC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
CSC had been rated a buy since July 10, 2008.
( DISAD) has been downgraded from hold to sell. Discovery Communications, through its subsidiaries, operates as a media and entertainment company worldwide. It provides original and purchased programming across various distribution platforms with approximately 100 television networks in 35 languages. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.
The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared with that of the S&P 500 and greatly underperformed compared with the media industry average. The net income has significantly decreased by 38.2% when compared with the same quarter one year ago, falling from $74.22 million to $45.88 million.
The company's current return on equity has slightly decreased from the same quarter one year prior. Thisimplies a minor weakness in the organization. Compared with other companies in the media industry and theoverall market, DISAD's return on equity significantly trails that of both the industry average and the S&P 500.
Net operating cash flow has significantly decreased to $11.56 million or 64.78% when compared with the samequarter last year. In addition, when comparing it with the industry average, the firm's growth rate is much lower.The gross profit margin for DISAD is currently lower than what is desirable, coming in at 29.10%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 23.60% has significantly outperformed against the industry average.
Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over thelast year: it has tumbled by 69.58%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.46% compared with the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
DISAD had been rated a hold since July 8, 2008.
The following ratings' changes were generated on September 24.
The following ratings' changes were generated on September 25.
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.
This article was written by a staff member of TheStreet.com Ratings.