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TheStreet.com's stock-picking model downgraded
Bank of New York Mellon
to "hold." The company provides custody and data-tracking services for financial firms.
: Second-quarter revenue fell 30% to $3.1 billion, but net income increased 33% to $412 million. Earnings per share decreased 12% to 23 cents, hurt by a higher share count. The operating margin expanded from 19% to 43% and the net margin jumped from 7% to 13%. The company has an adequate liquidity position, with $3.7 billion of cash reserves. And a debt-to-equity ratio of 0.8 indicates reasonable leverage.
: Bank of New York is down 3% this year, trailing the
Dow Jones Industrial Average
S&P 500 Index
. Still, it's up 40% from its March 6 low. The shares are trading at a fair price-to-earnings ratio of 14, but offer a lackluster 1.3% dividend yield.
The model upgraded software maker
: Second-quarter revenue inched up to $393 million as net income rose 23% to $43 million and earnings per share climbed 28% to 23 cents, helped by a lower share count. The operating margin increased from 7% to 11% and the net margin ascended from 9% to 11%. Zero debt, $580 million of cash and a quick ratio of 1.1 indicate a well-managed balance sheet.
: Citrix is up 56% this year, outperforming major U.S. indices, but still has upward momentum. The stock trades at an exorbitant price-to-earnings ratio of 45 and doesn't pay dividends.
The model downgraded
Host Hotels & Resorts
, a real estate investment trust that buys hotels, to "sell."
: Second-quarter revenue decreased 26% to $1 billion as the company swung to a net loss of $68 million, or 12 cents, from a profit of $183 million, or 31 cents, in the year-earlier period. The operating margin fell from 20% to 1% and the net margin dropped into negative territory. The company has a disappointing financial position with just $1.3 billion of cash and over $6 billion of debt. But a significant debt load is common for REITs.
: Host has increased 15% this year, outperforming the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 19 and didn't pay its most recent quarterly dividend. We think the share price is out of sync with growth expectations.
The model upgraded
to "buy." The company sells wireless communications products and services.
: Fiscal third-quarter revenue was roughly flat at $2.8 billion as earnings fell 2% to $738 million, or 44 cents per share. The operating margin improved from 30% to 33% and the net margin remained stable at 27%. Qualcomm has no debt or interest expenses, and has $9.9 billion of reserves, amounting to a high quick ratio of 4.6.
: Qualcomm is up 32% this year, outperforming major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 47 and offers a lackluster 1.4% dividend yield. While the company's fiscal fourth-quarter guidance was less than analysts expected, TheStreet.com Ratings' model gave high marks for its strong financial position and revenue.
The model upgraded lubricant maker
: Fiscal third-quarter revenue decreased 16% to $69 million as earnings dropped 15% to $6.9 million, or 41 cents per share. The operating margin increased from 15% to 16% and the net margin expanded marginally to 10%. WD-40 has $36 million of cash reserves, which translates to a strong quick ratio of 1.8. Its debt-to-equity ratio of 0.2 indicates modest leverage.
: WD-40 is up 11% this year, beating the Dow and S&P 500. The stock trades at an expensive price-to-earnings ratio of 22, but offers an attractive 3.2% dividend yield.