Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.
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Highlights from the ratings report include:
- FDML's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- FEDERAL-MOGUL HOLDINGS CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FEDERAL-MOGUL HOLDINGS CORP turned its bottom line around by earning $0.89 versus -$0.99 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $0.89).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Auto Components industry and the overall market, FEDERAL-MOGUL HOLDINGS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Currently the debt-to-equity ratio of 1.76 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, FDML's quick ratio is somewhat strong at 1.24, demonstrating the ability to handle short-term liquidity needs.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Auto Components industry. The net income has significantly decreased by 108.9% when compared to the same quarter one year ago, falling from $56.00 million to -$5.00 million.
Federal-Mogul Holdings Corporation supplies various automotive components, accessories, and systems worldwide. It operates in two divisions, Powertrain and Vehicle Components Solutions. Federal-Mogul has a market cap of $2.69 billion and is part of the consumer goods sector and automotive industry. Shares are down 9.4% year to date as of the close of trading on Friday.
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