TSC Ratings' Updates: HealthSouth

HealthSouth is a hold, while Kimberly-Clark is a buy.
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TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Thursday, May 28.

We rate

HealthSouth

(HLS)

a hold. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

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 good cash flow from operations. However, as a counter to these strengths, wealso find weaknesses including a generally disappointing performance in the stock itself and poor profitmargins.

Revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one yearprior, revenues slightly increased by 2.3%. Growth in the company's revenue appears to have helped boostthe earnings per share.Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.84 isweak.

We rate

Kimberly-Clark

(KMB) - Get Report

a buy. This is driven by several positive factors, which we believeshould have a greater impact than any weaknesses, and should give investors a better performanceopportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as itsnotable return on equity, good cash flow from operations and expanding profit margins.

We feel thesestrengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

The company's current return on equity greatly increased when compared to its ROE from the same quarterone year prior. This is a signal of significant strength within the corporation. When compared to othercompanies in the Household Products industry and the overall market, Kimberly-Clark's return onequity exceeds that of the industry average and significantly exceeds that of the S&P 500.

We rate

ONEOK

(OKE) - Get Report

a buy. This is driven by a few notable strengths, which we believe should have agreater impact than any weaknesses, and should give investors a better performance opportunity than moststocks we cover.

Among the primary strengths of the company is its attractive valuation levels, consideringits current price compared to earnings, book value and other measures. We feel these strengths outweighthe fact that the company has had generally poor debt management on most measures that we evaluated.

ONEOK, with its decline in revenue, underperformed when compared to the industry average. Since thesame quarter one year prior, revenues fell by 43.1%. Weakness in the company's revenue seems to have hurtthe bottom line, decreasing earnings per share. The company, on the basis of change in net income from the same quarter one year ago, has significantlyoutperformed against the S&P 500 and exceeded that of the Gas Utilities industry average. The net incomehas decreased by 15.0% when compared to the same quarter one year ago, dropping from $143.84 million to$122.29 million.

ONEOK's earnings per share declined by 14.7% in the most recent quarter compared to the same quartera year ago.

We rate

Rockwell Automation

(ROK) - Get Report

a hold. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation ofeither a positive or negative performance for this stock relative to most other stocks.

The company'sstrengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow fromoperations and expanding profit margins. However, as a counter to these strengths, we also findweaknesses including deteriorating net income, a generally disappointing performance in the stock itself andfeeble growth in the company's earnings per share.

Net operating cash flow has significantly increased by 189.91% to $169.60 million when compared to the samequarter last year. In addition, Rockwell has also vastly surpassed the industry average cashflow growth rate of -48.59%.

Despite the mixedresults of the gross profit margin, the net profit margin of 3.80% trails 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 47.60%, worse than the S&P 500's performance. Consistent with the plunge in thestock price, the company's earnings per share are down 69.79% compared to the year-earlier quarter.

Currently, the quickratio is 1.27, which shows that technically this company has the ability to cover short-term cash needs. Thecompany's liquidity has increased from the same period last year, indicating improving cash flow.

We rate

Take-Two Interactive Software

(TTWO) - Get Report

a sell. This is driven by several weaknesses, which webelieve should have a greater impact than any strengths, and could make it more difficult for investors toachieve positive results compared to most of the stocks we cover.

The company's weaknesses can be seenin multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins,weak operating cash flow 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 significantlyunderperformed compared to the Software industry average, but is greater than that of the S&P 500. The netincome has significantly decreased by 110.3% when compared to the same quarter one year ago, falling from$98.22 million to -$10.08 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. In comparison to the other companies in the Software industryand the overall market, Take-Two's return on equity is significantly below that of theindustry average and is below that of the S&P 500.

All ratings changes from May 28 are listed below.

This article was written by a staff member of TheStreet.com.