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.
The following ratings changes were generated on Monday, June 30.
, a financial services company, was upgraded to buy. The company provides tax, investment, mortgage and accounting and business consulting services and products.
Quarterly revenue rose 11% over the same period one year prior. Net income increased 735% over the prior-year quarter, rising from -$85.56 million to $543.56 million. Net operating cash flow has significantly increased by 63% to $3.58 billion when compared to the same quarter last year.
The gross profit margin for H&R Block is rather high, at 56%. Regardless of H&R Block's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the company's net profit margin of 20.8% significantly outperformed others in the industry. H&R Block had been rated a hold since May 2008.
Next up is
, which was downgraded to hold. The company provides a range of investment banking, securities and investment management services to corporations, financial institutions, governments and high-net-worth individuals worldwide.
The gross profit margin for Goldman is rather high, at 64%. Regardless of Goldman's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Goldman's net profit margin of 12% compares favorably to the industry average.
Goldman's earnings per share declined by 7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, Goldman increased its bottom line by earning $24.74 a share vs. $19.71 in the prior year. For the next year, the market is expecting a contraction of 32% in earnings ($16.81 vs. $24.74).
Goldman is off 19% from its price level of one year ago, reflecting a combination of the general market trend quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time. Goldman had been rated a buy since May 2008.
operates as a financial holding company for BancorpSouth Bank, has been downgraded to hold. The bank provides commercial banking and financial services to individuals and small and medium sized businesses.
Its net income increased by 4.7% when compared to the same quarter one year prior, rising from $33.58 million to $35.15 million. BancorpSouth's revenue growth trails the industry average of 22%. Since the same quarter one year prior, revenue increased by 4.5%. This can be construed as a modest strength in the organization.
BancorpSouth has outperformed in comparison with the industry average, but has underperformed when compared to that of the
. BancorpSouth's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.5%, which is also worse that the performance of the S&P 500.
Based on its current price in relation to its earnings, BancorpSouth is still more expensive than most of the other companies in its industry. Net operating cash flow has significantly decreased to $14.91 million, or 83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. BancorpSouth had been rated a hold since June 2006.
Next up is
, which has been downgraded to hold. FirstMerit operates as the holding company of FirstMerit Bank, which provides a range of banking, fiduciary, financial, insurance and investment services to corporate, institutional and individual customers in northern and central Ohio and western Pennsylvania.
The company's net income increased by 0.1% when compared to the same quarter one year prior, edging up from $31.42 million to $31.44 million. Compared to other companies in the industry and the overall market, FirstMerit's return on equity exceeds that of both the industry average and the S&P 500. FirstMerit, with its decline in revenue, underperformed when compared the industry average of 22%. Since the same quarter one year prior, revenue dropped by 3.6%. FirstMerit had been rated a buy since April 2008.
Also receiving a downgrade,
was shifted to hold from buy. The company operates as a multibank financial holding company that provides commercial and retail banking services in Texas and Oklahoma.
Its net income increased by 80% when compared to the same quarter one year prior, rising from $18.64 million to $33.48 million. IBOC's revenue growth trails the industry average of 22.4%. Since the same quarter one year prior, revenue increased by 3.1%.
International Bancshares reported significant earnings-per-share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive EPS growth over the past year. During the past fiscal year, International Bancshares increased its bottom line by earning $1.75 a share vs. $1.66 in the prior year.
International Bancshares is off 16.6% from its price level of one year ago, reflecting the general market trend but dismissing company's higher earnings per share on a year-over-year basis. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last 12 months; and it could be down again in the next 12 as well.
Additional ratings changes are listed below.
This article was written by a staff member of TheStreet.com Ratings.