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NEW YORK (

TheStreet

)

-- Howard Hughes

(NYSE:

HHC

) 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

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Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 38.1%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • HOWARD HUGHES 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, HOWARD HUGHES CORP continued to lose money by earning -$1.92 versus -$4.00 in the prior year. This year, the market expects an improvement in earnings (-$1.02 versus -$1.92).
  • 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 Real Estate Management & Development industry. The net income has significantly decreased by 273.3% when compared to the same quarter one year ago, falling from -$23.12 million to -$86.32 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Management & Development industry and the overall market, HOWARD HUGHES CORP's return on equity significantly trails that of both the industry average and the S&P 500.

The Howard Hughes Corporation owns, develops, and manages commercial, residential, and mixed-use real estate properties in the United States. The company operates through three segments: Master Planned Communities, Operating Assets, and Strategic Developments. Howard Hughes has a market cap of $5.85 billion and is part of the financial sector and real estate industry. Shares are up 23.8% year to date as of the close of trading on Friday.

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