Publish date:

TSC Ratings' Upgrades, Downgrades

Ingersoll-Rand, Merck, First Niagara Financial, 1-800-Flowers.com upgraded; Constellation Brands downgraded.

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.

TST Recommends

The following ratings changes were generated on April 7.

Ingersoll-Rand

(IR) - Get Report

is a diversified industrial company that operates in three segments: Climate Control Technologies, Industrial Technologies and Security Technologies. The stock has been upgraded to buy. For the fourth quarter, net income grew to $2.52 million from $221.90 million a year ago, and revenue increased 8.4% to $2.32 billion. Meanwhile, earnings per share fell to 61 cents from 68 cents in the same period.

For 2008, the market expects an improvement in full-year EPS to $3.79 from $2.48 in 2007. The company's debt-to-equity ratio of 0.18 is very low, implying successful management of debt, and its quick ratio of 1.98 demonstrates an ability to cover short-term liquidity needs.The stock's rise over the past year has outperformed that of the

S&P 500

. Ingersoll-Rand had been rated hold since Feb. 25.

Merck

(MRK) - Get Report

, a provider of products for human and animal health, has been downgraded to hold. Revenue growth, good cash flow from operations and expanding profit margins are balanced by a disappointing stock-price performance, deteriorating net income and feeble growth in the company's earnings per share. For the fourth quarter, revenue increased 3.3% year over year to $6.24 billion, while earnings per share swung to a loss of 75 cents from a profit of 22 cents. Net operating cash flow increased 32% to $2.35 billion.

The company's debt-to-equity ratio of 0.32 is low, implying successful management of debt. However, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.

Shares have fallen 11.84% in the past year. Despite the decline, the stock still carries a price-to-earnings ratio of 26.67, making it more expensive than others in its sector. Merck had been rated buy since April 20, 2007.

First Niagara Financial

(FNFG)

, the holding company for First Niagara Bank, which provides retail and commercial banking products, has been upgraded to buy. For the fourth quarter, net income increased 33% year over year to $27.8 million, despite a revenue decline of 3.5% to $129.4 million. For 2008, the market expects full-year EPS to remain flat at 81 cents.

The company's gross profit margin is rather high at 58%, but has decreased from last year. Despite a 28% increase in cash flow, First Niagara is still growing at a significantly lower rate than the industry average. First Niagara Financial had been rated hold since Jan. 10.

1-800-Flowers.com

(FLWS) - Get Report

, a gift retailer, has been upgraded to buy.For the second quarter of fiscal 2008, earnings per share improved 12% year over year to 29 cents, while revenue climbed 1.3% to $334.2 million. For 2008, the market expects an improvement in full-year EPS to 34 cents from 27 cents in 2007. Net operating cash flow has increased 36% to $105.4 million from the year-ago quarter. Despite an increase in cash flow, the company's cash flow growth rate is still lower than the industry average.

The stock has outperformed the S&P 500 in the past year, but we feel it still has upside potential despite its impressive rise. 1-800-Flowers.com had been rated hold since Oct. 24.

Constellation Brands

(STZ) - Get Report

, a maker and marketer of wine, spirits and imported beer, has been downgraded to sell. For the fourth quarter, net income swung to a loss of $831.9 million from a profit of $70.2 million a year ago. For 2008, the market expects an improvement in full-year EPS to $1.68 from a loss of $2.95 in 2007. Earnings per share decreased to a loss of $3.86 from a profit of 29 cents in the same period. The debt-to-equity ratio of 1.90 is quite high, and the company maintains a quick ratio of 0.44, which demonstrates an inability to cover short-term cash needs.

Return on equity has greatly decreased year over year. This is a signal of major weakness within the corporation. After fluctuating for a year, share price is largely unchanged from its year-ago levels. Although the stock is selling at a discount to others in its sector, we do not feel now is a good time to buy. Constellation Brands had been rated hold since Jan. 17.

Additional ratings changes from April 7 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

FLWS

1-800-FLOWERS.COM

Upgrade

Buy

Hold

CDI

CDI CORP

Upgrade

Buy

Hold

CLCT

COLLECTORS UNIVERSE INC

Downgrade

Sell

Hold

CGX

CONSOLIDATED GRAPHICS INC

Upgrade

Buy

Hold

STZ

CONSTELLATION BRANDS

Downgrade

Sell

Hold

STZ.B

CONSTELLATION BRANDS

Downgrade

Sell

Hold

ECGI

ENVOY CAPITAL GROUP INC

Downgrade

Hold

Buy

FNFG

FIRST NIAGARA FINANCIAL GRP

Upgrade

Buy

Hold

FLOW

FLOW INTL CORP

Upgrade

Buy

Hold

INDB

INDEPENDENT BANK CORP/MA

Upgrade

Buy

Hold

IR

INGERSOLL-RAND CO LTD

Upgrade

Buy

Hold

MRK

MERCK & CO

Downgrade

Hold

Buy

MO

ALTRIA GROUP INC

Downgrade

Hold

Buy

AGYS

AGILYSYS INC

Downgrade

Sell

Hold

SONE

S1 CORP

Upgrade

Buy

Hold

SU

SUNCOR ENERGY INC

Upgrade

Buy

Hold

TTC

TORO CO

Downgrade

Hold

Buy

TG

TREDEGAR CORP

Upgrade

Buy

Hold

TWIN

TWIN DISC INC

Downgrade

Hold

Buy

USPH

U S PHYSICAL THERAPY INC

Upgrade

Buy

Hold

VII

VICON INDUSTRIES INC

Downgrade

Hold

Buy

VVUS

VIVUS INC

Upgrade

Hold

Sell

BHBC

BEVERLY HILLS BANCORP INC

Downgrade

Sell

Hold

PRGF

PROGINET CORP

Downgrade

Sell

Hold

CLMS

CALAMOS ASSET MANAGEMENT INC

Downgrade

Hold

Buy

GHDX

GENOMIC HEALTH INC

Downgrade

Sell

Hold

ISLN

ISILON SYSTEMS INC

Initiated

Sell

UPG

UNIVERSAL POWER GROUP INC

Initiated

Sell

AVAV

AEROVIRONMENT INC

Initiated

Hold

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