TSC Ratings' Upgrades, Downgrades

CB Richard Ellis, Magna International, Newfield Exploration upgraded; Celgene, Cigna downgraded.
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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 May 9.

CB Richard Ellis

(CBG)

, a commercial real estate services company, has been upgraded to buy. For the first quarter, earnings per share climbed to 10 cents from 5 cents a year ago, and revenue increased 1.4% year over year to $1.23 billion. For 2008, the market expects an improvement in full-year EPS to $1.87 from $1.65 in 2007. The company's current return on equity greatly increased from the year-ago period to 39% and exceeds the industry average. This is a signal of significant strength within the corporation. Shares have fallen 41% in the past year. Investors have so far failed to pay much attention to earnings improvements. With a price-to-earnings ratio of 13.11, the stock trades at a discount to others in its industry. CB Richard Ellis had been rated hold since Jan. 15.

Magna International

(MGA) - Get Report

, a diversified automotive supplier, has been upgraded to buy. For the first quarter, revenue grew 3.1% year over year to $6.62 billion, and earnings per share declined to $1.78 from $1.96. The debt-to-equity ratio is very low at 0.08 and is below the industry average, implying very successful management of debt levels. A quick ratio of 1.21 illustrates an ability to avoid short-term cash problems. Return on equity has improved slightly from the year-ago quarter to 7.5%. This can be construed as a modest strength in the organization. However, return on equity lags the industry average. Magna International had been rated hold since March 27.

Newfield Exploration

(NFX)

, an independent oil and gas company, has been upgraded to buy. For the first quarter, revenue increased 17% year over year to $515 million, and loss per share widened to 50 cents from 37 cents. For 2008, the market expects an improvement in full-year EPS to $3.36 from $1.31 in 2007. The debt-to-equity ratio of 0.30 is very low but exceeds the industry average. Shares have risen 40% in the past year, outperforming the broader market and netting the stock a price-to-earnings ratio of 53, which sets it at a premium to others in its industry. We believe that other strengths justify the higher price.

Celgene

(CELG) - Get Report

, a biopharmaceutical company, has been downgraded to hold. Strengths such as robust revenue growth, expanding profit margins and a strong stock-price performance are balanced by deteriorating net income and disappointing return on equity. For the first quarter, revenue leaped 57% year over year to $461 million, while earnings per share swung to a loss of $3.98 from a profit of 14 cents. For 2008, the market expects an improvement in full-year EPS to $1.51 from 54 cents in 2007. The company's gross profit margin is very high at 90%. However, its negative net profit margin significantly underperformed when compared to the industry average. Return on equity has greatly decreased from the year-ago quarter and trails the industry average. Celgene had been rated buy since Nov. 14, 2006.

Cigna

(CI) - Get Report

, a health care provider, has been downgraded to hold.Strengths such as revenue growth, a solid financial position and a reasonable valuation are balanced by deteriorating net income, poor profit margins and weak operating cash flow. For the first quarter, revenue grew 4.5% year over year to $4.57 billion, while earnings per share declined to 19 cents from 93 cents. For 2008, the market expects an improvement in full-year EPS to $4.22 from $3.89 in 2007. The current debt-to-equity ratio, 0.49, is below the industry average, implying successful management of debt levels. The company's gross profit margin is extremely low at 3.4% and has decreased from the year-ago quarter. Its net profit margin of 1.3% also trails the industry average. With a price-to-earnings ratio of 13.07, the company trades at a slight discount to its sector peers. However, we do not feel that now is a good time to buy. Cigna had been rated buy since May 8, 2006.

Additional ratings changes from May 9 are listed below.

Ticker

Company Name

Change

New Rating

Former Rating

AEL

American Equity Investment Life

Upgrade

Buy

Hold

ALLN

Allin Corp.

Upgrade

Hold

Sell

CBG

CB Richard Ellis

Upgrade

Buy

Hold

CELG

Celgene

Downgrade

Hold

Buy

CI

Cigna

Downgrade

Hold

Buy

IPGP

IPG Photonics

Upgrade

Hold

Sell

MCGC

MCG Capital

Upgrade

Hold

Sell

MGA

Magna International

Upgrade

Buy

Hold

NFX

Newfield Exploration

Upgrade

Buy

Hold

OPTV

Open TV Corp.

Upgrade

Hold

Sell

RJF

Raymond James Financial

Upgrade

Buy

Hold

SAN

Banco Santander-Chile

Upgrade

Buy

Hold

SFD

Smithfield Foods

Upgrade

Buy

Hold

TBIO

Transgenomic

Upgrade

Hold

Sell

VTR

Ventas

Upgrade

Buy

Hold

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