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 Monday, May 18.

We've upgraded

Alcon

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

Alcon's 0.2 debt-to-equity ratio is below the industry average, and its quick ratio is 2.1. Its 79.2% gross profit margin has increased from the same quarter last year. Net profit margin of 30.3% outperformed the industry average. Net operating cash flow increased 2.8% compared with the year-ago quarter to $409.4 million, and EPS improved by 5.6%. The company has demonstrated a pattern of positive EPS growth over the past two years, but we anticipate underperformance relative to this pattern in the coming year. Revenue fell 2.8% compared with the year-ago quarter.

We've upgraded

Danaher

(DHR) - Get Report

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

Danaher's 0.3 debt-to-equity ratio is below the industry average, and its quick ratio is 1.1. The 51% gross profit margin has increased from the same quarter last year, and the net profit margin of 9% is above the industry average. Revenue fell by 13.2% since the year-ago quarter, and EPS declined by 13.3%. We feel that the company is likely to report a decline in EPS in the coming year. Net income decreased by 14%, from $276.5 million to $237.7 million.

We've upgraded

Hewlett-Packard

(HPQ) - Get Report

from hold to buy, driven by its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue increased by 1.2% since the year-ago quarter, but EPS declined by 6.3%. We do feel the company is poised for EPS growth in the coming year. Hewlett-Packard's debt-to-equity ratio of 0.5 is below the industry average. Its quick ratio is 0.6. Net income decreased by 13.1% compared with the year-ago quarter, from $2.1 billion to $1.9 billion.

We've upgraded

L-3 Communications

(LLL) - Get Report

from hold to buy, driven by its revenue growth, increase in net income, good cash flow from operations, notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue increased by 3.7% since the same quarter last year, and EPS rose by 9.9%, though we anticipate underperformance in the coming year relative to the company's two-year pattern of positive EPS growth. Net income rose 5.3% compared with the year-ago quarter, from $189 million to $199 million. Net operating cash flow increased by 63.4% to $152 million. Return on equity also improved, which can be construed as a modest strength in the organization.

We've upgraded

StatoilHydro

(STO)

from hold to buy, driven by its expanding profit margins 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.

The company's 48.5% gross profit margin has increased from the year-ago quarter, though the 3.3% net profit margin trails the industry average. Revenue fell 46.2% compared with the year-ago quarter, and EPS decreased. The 0.4 debt-to-equity ratio is above the industry average. The 0.8 quick ratio is weak. Net income fell 82.7% since the year-ago quarter, from $3.1 billion to $540.4 million. ROE also decreased, implying weakness.

Other ratings changes include

Morningstar

(MORN) - Get Report

, upgraded from hold to buy, and

Blackstone Group

(BX) - Get Report

, upgraded from sell to hold.

All ratings changes from May 18 are listed below.

Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

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