TSC Ratings' Upgrades, Downgrades - TheStreet

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 Friday, May 2.

Verizon

(VZ) - Get Report

, a telecommunications company, has been upgraded to buy.For the first quarter, revenue grew 5.5% year over year to $23.83 billion, and earnings per share climbed to 57 cents from 51 cents. For 2008, the market expects an improvement in full-year EPS to $2.62 from $1.90 in 2007.

Net operating cash flow has increased 19% to $5.39 billion. Its cash-flow growth rate exceeds the industry average. The gross profit margin is high at 60%, but the net profit margin of 6.9% trails the industry average. Share price has not changed much from where it was a year ago. We believe the stock still has good upside potential. Verizon had been rated hold since Feb. 29.

StatoilHydro

(STO)

, which explores, produces, transports, refines and markets petroleum and petroleum-derived products, has been upgraded to buy. For the fourth quarter, revenue grew 41% year over year to $26.26 billion, while earnings per share declined to 33 cents from 98 cents. Net operating cash flow has more than doubled to $4.95 billion in the same period. Its cash flow growth rate exceeds the industry average.

At 37%, the gross profit margin is strong, although a net profit margin of 4.1% trails the industry average. The company's debt-to-equity ratio of 0.28 is very low but exceeds the industry average, and its quick ratio of 0.70 is somewhat weak and could be cause for future problems. Shares have climbed 26% in the past year. Despite the increase in price, the stock's price-to-earnings ratio of 9.81 makes it cheap relative to others in its industry. StatoilHydro had been rated hold since March 20.

Symantec

(SYMC) - Get Report

, which provides software and services for information security, availability, compliance, information technology and systems performance, has been upgraded to buy. For the fourth quarter, revenue increased 13% year over year to $1.54 billion, and earnings per share climbed to 22 cents from 7 cents. For 2008, the market expects an improvement in full-year EPS to $1.43 from 53 cents in 2007. Net operating cash flow has increased 10% to $674.4 million from the year-ago quarter. At 77% the gross profit margin is currently very high. However, the net profit margin of 12% significantly trails the industry average. Symantec had been rated hold since Feb. 12, 2007.

CyberSource

( CYBS), a provider of electronic payment and risk-management solutions, has been upgraded to buy. For the first quarter, revenue more than doubled to $141.4 million, while earnings per share declined to a penny from 2 cents.

With no debt to speak of, CyberSource has a debt-to-equity ratio of zero, which we consider a favorable sign. Its quick ratio of 2.17 demonstrates an ability to cover short-term liquidity needs.

Net operating cash flow has significantly increased to $11.7 million when compared with the same quarter last year. The company's gross profit margin is high at 68%. However, its net profit margin of 1% significantly trails the industry average. Shares have leapt 40% in the past year. We feel, however, that other strengths this company displays justify these higher price levels. CyberSource had been rated hold since Feb. 8.

Omniture

( OMTR), which provides online business optimization software, has been upgraded to hold.Strengths such as robust revenue growth, a solid financial position and good cash flow from operations are balanced by deteriorating net income and feeble growth in earnings per share. For the first quarter, revenue more than doubled to $69.6 million, while the company's per-share loss increased to 19 cents from 5 cents.

For 2008, the market expects an improvement in full-year EPS to a profit of 45 cents from a loss of 18 cents in 2007. Omniture's debt-to-equity ratio of 0.01 is very low but exceeds the industry average. Its quick ratio of 1.24 illustrates the ability to avoid short-term cash problems. Omniture had been rated sell since TheStreet.com Ratings initiated coverage on July 31.

Eastman Kodak

( EK), a maker of digital and film-based imaging products, has been downgraded to sell. At 28%, gross profit margin trails the industry average.

Net operating cash flow has significantly decreased to negative $768 million or from the year-ago quarter. Return on equity greatly increased year over year but remains at negative 4.7%, significantly below the industry average. The current debt-to-equity ratio, 0.52, 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 1.08, which illustrates the ability to avoid short-term cash problems. Shares have tumbled 32% in the past year. The decline may make the stock attractive in the future, but due to other concerns, we feel that it is still not a good buy right now. Eastman Kodak had been rated hold since Nov. 3, 2006.

Additional ratings changes from May 2 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

ADTN

Adtran

Upgrade

Buy

Hold

AIN

Albany International

Upgrade

Buy

Hold

AMCC

Applied Micro Circuits

Upgrade

Hold

Sell

ARKR

Ark Restaurants

Downgrade

Hold

Buy

BITS

Bitstream

Upgrade

Buy

Hold

CAI

CACI International

Upgrade

Buy

Hold

CASM

CAS Medical Systems

Downgrade

Sell

Hold

CMCSK

Comcast

Upgrade

Buy

Hold

CYBS

CyberSource

Upgrade

Buy

Hold

EK

Eastman Kodak

Downgrade

Sell

Hold

GET

Gaylord Entertainment

Upgrade

Hold

Sell

ENG

ENGlobal

Upgrade

Buy

Hold

LB

LaBarge

Upgrade

Buy

Hold

ECPG

Encore Capital Group

Downgrade

Sell

Hold

OSIS

OSI Systems

Upgrade

Buy

Hold

OI

Owens-Illinois

Upgrade

Buy

Hold

PMACA

PMA Capital

Upgrade

Buy

Hold

PCH

Potlatch

Upgrade

Buy

Hold

PRSP

Prosperity Bancshares

Upgrade

Buy

Hold

REGN

Regeneron Pharmaceuticals

Upgrade

Hold

Sell

SMTC

Semtech

Upgrade

Buy

Hold

PDGI

PharmaNet Development Group

Downgrade

Sell

Hold

SBGI

Sinclair Broadcast Group

Upgrade

Buy

Hold

SNSTA

Sonesta International Hotels

Upgrade

Hold

Sell

SYMC

Symantec

Upgrade

Buy

Hold

TECUA

Tecumseh Products

Upgrade

Hold

Sell

TECUB

Tecumseh Products

Upgrade

Hold

Sell

GROW

U.S. Global Investors

Downgrade

Hold

Buy

VZ

Verizon

Upgrade

Buy

Hold

STO

StatoilHydro

Upgrade

Buy

Hold

HCFL

Home City Financial

Upgrade

Hold

Sell

MWV

MeadWestvaco

Downgrade

Hold

Buy

NPO

EnPro Industries

Upgrade

Buy

Hold

EUBK

EuroBancshares

Downgrade

Sell

Hold

ORA

Ormat Technologies

Upgrade

Buy

Hold

KFFB

Kentucky First Federal Bancorp

Upgrade

Hold

Sell

JRJC

China Finance Online

Upgrade

Hold

Sell

IRBT

iRobot

Downgrade

Sell

Hold

GASS

StealthGas

Upgrade

Buy

Hold

OMTR

Omniture

Upgrade

Hold

Sell

FIRE

Sourcefire

Initiated

Sell

BBND

BigBand Networks

Initiated

Hold

DGLY

Digital Ally

Upgrade

Buy

Hold

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