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TSC Ratings' Updates: Intel

Intel, DreamWorks, Valley National, Jones Lang Lasalle and TransAlta have their ratings changed.

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 Aug. 11:

We upgraded

DreamWorks Animation

(DWA)

to buy from hold. The Glendale, Calif., company specializes in the development of computer-generated films. The upgrade is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover.

DreamWorks' debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels.

The company's current return on equity greatly increased when compared with its ROE from the same quarter a year ago. This is a signal of significant strength within the corporation. In comparison to the other companies in the media industry and the overall market, DreamWorks' return on equity significantly exceeds that of the industry average and is above that of the

S&P 500

.

Net operating cash flow has significantly increased by 265.23% to $109.26 million when compared with the same quarter last year. In addition, DreamWorks has also vastly surpassed the industry average cash flow growth rate of negative 12.97%.

Compared with where it was trading a year ago, DreamWorks' share price has not changed very much due to the relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

We consider a 48.40% gross profit margin for DreamWorks strong. Regardless of DreamWorks' high profit margin, it decreased from the same period last year. Despite the mixed results of the gross profit margin, DreamWorks' net profit margin of 19.50% compares favorably to the industry average.

DreamWorks had been rated a hold as of November 2006.

Next is chipmaker

Intel

(INTC) - Get Intel Corporation (INTC) Report

, which also was upgraded to buy from hold. Based in Santa Clara, Calif., the technology firm has improved earnings per share by 27.3% in the most recent quarter from a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year and we feel that this trend should continue. During the past fiscal year, Intel increased its bottom line by earning $1.18, up from 86 cents in the prior year. This year, the market expects an improvement in earnings to $1.28.

The company, on the basis of net income growth year-over-year, has significantly outperformed against the S&P 500 and the semiconductors and semiconductor-equipment industry average. Despite its growing revenue, the company underperformed the industry average of 9.8%. Since the same quarter one year prior, revenue increased by 9.1%.

Intel's debt-to-equity ratio is very low at 0.05 and is currently below the industry average, implying very successful management of debt levels. To add to this, Intel has a quick ratio of 1.79, which demonstrates the ability of the company to cover short-term liquidity needs.

Net operating cash flow has increased to $2.83 billion, or 17%, from the same quarter last year. In addition, Intel has also modestly surpassed the industry average cash flow growth rate of 14.14%.

Intel had been rated a hold since February.

Valley National Bancorp

(VLY) - Get Valley National Bancorp Report

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, a Wayne, N.J., firm, was upgraded to buy from hold. The move was driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover.

The company, on the basis of net income growth year-over-year, has significantly outperformed the S&P 500 and exceeded that of the commercial banks industry average. Net income increased by 4.5% from the same quarter one year prior, going from $39.68 million to $41.48 million.

The gross profit margin for Valley National is rather high, currently at 59.20%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.40% is above that of the industry average.

However, Valley, with its decline in revenue, underperformed the industry average of 17.1%. Since the same quarter a year ago, revenue dropped by 3.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

The company's current return on equity has slightly decreased year-over-year. This implies a minor weakness in the organization. Compared with other commercial banks industry and the overall market, Valley's ROE exceeds the industry average and the S&P 500.

Valley's share price has not changed much in the past year due to the relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Still, the stock remains expensive compared with other similar companies. We feel, however, that other strengths this company displays compensate for this.

Valley had been rated a hold in November 2007.

Being downgraded to hold from buy was

Jones Lang Lasalle

(JLL) - Get Jones Lang LaSalle Incorporated Report

. The Chicago-based firm provides integrated real estate and investment management services. 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 current debt-to-equity ratio, 0.42, is low and is below the industry average, implying successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.

The gross profit margin for Jones Lang is currently extremely low, coming in at 8.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.90% trails that of the industry average.

Net operating cash flow has significantly decreased to $98.65 million, or 51.33%, from a year earlier. In addition, when compared with the industry average, the firm's growth rate is much lower.

Jones Lang Lasalle had been rated a buy in August 2006.

TransAlta

(TAC) - Get TransAlta Corporation Report

, a Calgary-based utilities firm, was downgraded to hold from buy. Currently, there is little evidence to justify the expectation of either a positive or negative performance for this stock relative to most others.

The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenue rose by 15.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in EPS.

The company's current return on equity greatly increased year over year, a signal of significant strength within the corporation. Compared to other companies in the independent power producers and energy industry and the overall market, TransAlta's ROE exceeds both.

The gross profit margin for TransAlta is rather high, currently at 52.40%. Regardless of the company's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, net profit margin of 6.60% compares favorably with the industry average.

The company, on the basis of change in net income year over year, has significantly underperformed the industry average, but is greater than that of the S&P 500. Net income has decreased by 17.5% from last year, dropping from $57 million to $47 million.

Currently the debt-to-equity ratio of 1.52 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.37, which clearly demonstrates the inability to cover short-term cash needs.

TransAlta had been rated a buy as of February.

Additional ratings changes from Aug. 11 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

AHL

Aspen Insurance Holdings Ltd.

Upgrade

Buy

Hold

AHT

Ashford Hospitality Trust

Downgrade

Sell

Hold

ASGN

On Assignment Inc.

Upgrade

Buy

Hold

BKMU

Bank Mutual Corp.

Upgrade

Buy

Hold

DGIT

DG FastChannel Inc

Upgrade

Buy

Hold

DORM

Dorman Products Inc.

Upgrade

Buy

Hold

DWA

Dreamworks Animation Inc.

Upgrade

Buy

Hold

ENOC

EnerNOC Inc.

Initiated

Sell

ESGR

Enstar Group Ltd.

Upgrade

Hold

Sell

FCF

First Commonwealth Financial

Upgrade

Buy

Hold

FUR

Winthrop Realty Trust Inc.

Downgrade

Sell

Hold

GFF

Griffon Corp.

Upgrade

Hold

Sell

GLP

Global Partners LP

Downgrade

Sell

Hold

GSI

General Steel Holdings Inc.

Upgrade

Buy

Hold

INTC

Intel Corp.

Upgrade

Buy

Hold

JAZZ

Jazz Pharmaceutical Inc.

Initiated

Sell

JLL

Jones Lang Lasalle Inc.

Downgrade

Hold

Buy

LAD

Lithia Motors Inc.

Downgrade

Sell

Hold

MSCS

MSC Software Corp.

Upgrade

Hold

Sell

MTEX

Mannatech Inc.

Downgrade

Sell

Hold

ORBT

Orbit International

Downgrade

Sell

Hold

OREX

Orexigen Therapeutics Inc.

Initiated

Sell

PCS

MetroPCS Communications

Initiated

Sell

PGH

Pengrowth Energy Trust

Downgrade

Sell

Hold

RGEN

Repligen Corp.

Upgrade

Buy

Hold

SGMA

SigmaTron International Inc.

Downgrade

Sell

Hold

STZ

Constellation Brands Inc.

Upgrade

Hold

Sell

STZ.B

Constellation Brands Inc.

Upgrade

Hold

Sell

TAC

TransAlta Corp.

Downgrade

Hold

Buy

TTI

TETRA Technologies Inc.

Upgrade

Buy

Hold

VLY

Valley National Bancorp

Upgrade

Buy

Hold

YAVY

Yadkin Valley Financial Corp.

Upgrade

Buy

Hold

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