FirstEnergy, Western Union: Ratings Changes
BOSTON (
) -- TheStreet.com's stock-rating model upgraded electric utility
FirstEnergy
(FE) - Get Report
to "buy."
The numbers
: Second-quarter revenue declined 7% to $3 billion, but net income increased 57% to $414 million, or $1.36 a share. Its gross margin rose from 30% to 32%, but its operating margin remained steady at 18%. A quick ratio of 0.4 indicates weak liquidity, but its cash balance has grown 12-fold to $900 million since the year-earlier period. A debt-to-equity ratio of 1.6 reflects excessive leverage.
The stock
: FirstEnergy has fallen 3% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 11, a discount to the market and utilities. Ths shares offer a 4.7% dividend yield.
The model upgraded video-game retailer
GameStop
(GME) - Get Report
to "buy."
The numbers
: Second-quarter net income dropped 32% to $39 million, or 23 cents a share, as revenue declined 4% to $1.7 billion. Its gross margin rose from 27% to 29%, but its operating margin decreased from 6% to 4%. Just $197 million of cash and a quick ratio of 0.2 demonstrate weak liquidity. A debt-to-equity ratio of 0.2 indicates modest leverage.
The stock
: GameStop is up 21% this year, beating the
Dow Jones Industrial Average
and
S&P 500 Index
. The stock trades at a price-to-earnings ratio of 11, a discount to the market and electronics retail peers. The company does not pay dividends.
The model upgraded information technology consultant
SAIC
(SAI)
to "buy."
The numbers
: Fiscal second-quarter net income rose 13% to $123 million, or 31 cents a share. Revenue jumped 8% to $2.7 billion. Its gross margin remained steady at 15% and its operating margin rose from 7% to 8%. A quick ratio of 1.8 and $951 million of cash demonstrate strong liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.
The stock
: SAIC is down 10% this year, lagging behind major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to the market and tech-consulting peers. The company does not pay dividends.
The model upgraded money transfer provider
Western Union
(WU) - Get Report
to "buy."
The numbers
: Second-quarter net income dropped 5% to $220 million, but earnings per share remained steady at 31 cents, helped by a lower share count. Revenue declined 7% to $1.3 billion. Its gross margin rose from 45% to 47%, but its operating margin was little-changed at 27%. Over $1.9 billion of cash reflects adequate liquidity, but a debt-to-equity ratio of 11 indicates excessive leverage.
The stock
: Western Union has advanced 43% this year, outpacing major U.S. indices. The stock trades at a price-to-earnings ratio of 16, a discount to the market and data processing and outsourcing peers. The shares offer a 0.2% dividend yield.
The model upgraded insurer
Alleghany
(Y) - Get Report
to "buy."
The numbers
: Second-quarter net income surged 158% to $46 million and earnings per share climbed 390% to $5. Revenue grew 19% to $300 million. Its gross margin rose from 10% to 25% and its operating margin increased from 8% to 22%. The company has an ideal financial position, with $417 million of cash and no debt.
The stock
: Alleghany has fallen 8% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 228, a premium exaggerated by the company's losses in the third and fourth quarter of 2008. The company does not pay dividends.
-- Reported by Jake Lynch in Boston.
