The following ratings changes were generated on Tuesday, Feb. 10.
, which engages in the production and marketing of various meat and food products, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
Revnue rose by 11.8% compared with the same quarter last year, trailing the industry average of 36.4% growth. ROE slightly decreased, outperforming both the industry and the S&P 500. EPS declined by 31.5%, but we expect the company's pattern of declining EPS over the past year to reverse in the coming year. Hormel's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying very successful management of debt levels, but its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
Shares are down 19.5% over the past year, reflecting, in part, the market's overall decline. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
, which manufactures and sells cigarettes, from hold to buy, driven by its increase in net income, revenue growth, notable return on equity, expanding profit margins and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
Net income increased by 20.6% since the same quarter a year ago, outperforming the S&P 500 and the tobacco industry. Revenue rose by 13.7% but underperformed the industry. ROE also rose, a clear sign of strength within the company. EPS are up 24.4% compared with the year-ago quarter, and stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will experience more growth in the coming year. Lorillard's gross profit margin of 45.4% is strong, having increased from the same quarter last year, and its net profit margin of 23.7% is above the industry average.
Sport Supply Group
( RBI), which manufactures, markets and distributes sporting goods equipment, physical education and recreational and leisure products, from hold to buy. This rating is driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, compelling growth in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
Revenue increased by 4.5% since the year-ago quarter, and net income increased by 23.6%, outperforming the S&P 500 and the leisure equipment and products industry. EPS improved by 12.9%. The company has demonstrated a pattern of positive EPS growth over the past two years, which we feel should continue. Sport Supply's debt-to-equity ratio of 0.5 is low and is below the industry average, implying successful management of debt levels, and its quick ratio of 1.5 demonstrates its ability to cover short-term liquidity needs.
, whose subsidiary U-Haul supplies products and services used to move and store household and commercial goods in the U.S. and Canada, from hold to sell. This rating is driven by the company's generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income, generally weak debt management and disappointing return on equity.
EPS declined 111.6% compared with the year-ago quarter, and we expect the company's two-year pattern of declining EPS to continue in the coming year. Net income decreased by 140.1% since the same quarter last year, significantly underperforming the S&P 500 and the road and rail industry. ROE decreased slightly. Amerco's debt-to-equity ratio of 2.1 is very high and currently above the industry average, implying very poor management of debt levels within the company.
Shares have tumbled 40.2% over the past year, underperforming the S&P 500, but don't assume that the stock can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Amerco is still more expensive than most of the other companies in its industry.
Other ratings changes included
( HEW) and
, both upgraded from hold to buy.
All ratings changes generated on Feb. 10 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.