The following ratings changes were generated on Wednesday, Oct. 15.
, which manufactures construction and miningequipment, diesel and natural gas engines and industrial gas turbines, from buy to hold. Strengths include its revenue growth, impressive record of earnings per share growth andcompelling growth in net income. Weaknesses include generally poor debt management, poor profit margins and weak operating cash flow.
Caterpillar is subject to the risks related to the pricing of steel and other commodities,which could have an adverse effect on the company's performance. Declining margins, deteriorating returns and low liquidity are also concern areas.
We've downgraded mobile device manufacturer
from buy to hold. Strengths include its revenue growth, largely solid financial position with reasonable debtlevels by most measures and good cash flow from operations. Weaknesses include unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Nokia's revenue growth of 4.9% since the same quarter a year ago outpaced the industry average of 0%, but EPS declined. It's debt-to-equity ratio of 0.09 is very low but currently higher than the industry average. The company also maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems. Its gross profit margin of 36.8% is strong, though it has decreased from the same period last year. An 8.3% net profit margin, however, trails the industry average.
Net income has significantly decreased by 54.9% when compared with the same quarter a year ago, from $3,837.75 million to $1,730.04 million, underperforming the S&P 500 and the communications equipment industry. Shares have tumbled 53.52% over the last year, underperforming the S&P 500, and EPS are down 53.6%. Naturally, the overall market trend is bound to be a significant factor, and the sharp decline could be a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
, a multibank holding company, from hold to buy, based on its good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Net operating cash flow has increased to $33.02 million, or 18.78% when compared to the same quarter last year, but Trustmark is still growing at a significantly lower rate than the industry average of 305.81%. It's gross profit margin of 56.3% is rather high, but it has managed to decrease from the same period last year. Its net profit margin of 10.40% trails the industry average. Since the same quarter last year, revenues dropped by 3.4%, underperforming the industry average of 9.6%, and EPS decreased. The company's current return on equity has slightly decreased from the same quarter one year prior, implying a minor weakness in the organization, but it exceeds the industry average for ROE as well as the S&P 500.
Shares have plunged 26.49% over the past years, and EPS have sunk 39.21%. The silver lining is that the performance of the broader market is even worse. However, the fact that it may have lostless money is no consolation for investors who have held this stock. Turning toward the future, the stock's decline should not necessarily be interpreted as a negative; it isone of the factors that makes this stock an attractive investment.
We've downgraded casino developer and operator
from buy to hold. Strengths include its robust revenue growth, expanding profit margins and good cash flow from operations. Weaknesses include a generally disappointing performance in the stock itself, generally poor debt management and disappointing return on equity.
Wynn's revenue growth of 20% has slightly outpaced the industry average of 19.9%, boosting EPS. Its 37.1% gross profit margin is strong, but it has decreased from the same period last year. Wynn's net profit margin of 33% significantly outperformed against the industry. Net operating cash flow has increased to $200.46 million, or 23.91% when compared to the same quarter last year, but this increase is still marginally below the industry's average growth wrate of 27.81%. ROE has greatly decreased on the year, a signal of major weakness. On the basis of ROE, Wynn has underperformed the hotels, restaurants and leisure industry but outperformed the S&P 500.
Shares are down 62.58%, worse than the performance of the S&P 500, but despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
We've downgraded steel producer
from buy to hold. Strengths include its robust revenue growth, increase in net income and attractive valuation levels. Weakness include weak operating cash flow, poor profit margins and a generally disappointing performance in the stock itself.
Revenue growth of 59.5% since the same quarter last year exceeded the industry average of 41%, boosting EPS. The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Its quick ratio, however, of 0.92 is somewhat weak and could be cause for future problems. U.S. Steel's gross profit margin is rather low at 18.5%, but it has managed to increase from the same period last year. Net profit margin of 9.9% is significantly lower, and net operating cash flow has significantly decreased to $226 million, or 52.01%. In addition, the company's growth rate is much lower than the industry average.
Other ratings changes include
, downgraded from hold to sell, and
( DBRN), downgraded from buy to hold.
All ratings changes generated on Oct. 15 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.
This article was written by a staff member of TheStreet.com Ratings.