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) -- TheStreet.com's stock-rating model upgraded auto financer
( ACF) to "hold."
: Fiscal fourth-quarter revenue fell 26% to $445 million, but the company swung to a net profit of $31 million from a loss of $150 million in the year-earlier period. The operating margin increased from 36% to 44% and the net margin climbed from negative territory to 7%. The company has ample cash reserves. But a debt-to-equity ratio of 4.7 and $147 million of quarterly interest expenses demonstrate excessive leverage.
: AmeriCredit shares have doubled this year, trouncing major U.S. indices. The company has a pattern of erratic profits and doesn't pay dividends. The quarterly profit was a welcome improvement.
The model upgraded oil and gas equipment provider
: Second-quarter net income fell 9% to $139 million and earnings per share dropped 5% to 62 cents as revenue declined 14% to $1.3 billion. The operating margin passed 16% and the net margin inched up to 11%. Cameron has ample liquidity, as indicated by its quick ratio of 1.1. And a debt-to-equity ratio of 0.5 reflects a conservative capital structure.
: Cameron is up 68% this year, outpacing major U.S. indices. With a price-to-earnings ratio of 14, the stock is trading at a discount to the market. Cameron doesn't pay dividends.
The model upgraded real estate investment trust
, which invests in health care properties, to "buy."
: Second-quarter revenue rose 6% to $299 million, but net income plummeted 58% to $97 million, or 23 cents a share. The operating margin increased from 49% to 51%, but the net margin declined from 92% to 33%. The company has a higher-than-ideal debt burden, as evident in its debt-to-equity ratio of 1. And the company is poorly capitalized, with just $82 million of cash reserves. Despite the balance sheet woes, HCP has a robust business model and is seizing the opportunity to purchase undervalued real estate.
: HCP is down 5% this year, trailing major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 31, but offers a cash distribution yield of 7%. Cash distributions are taxed differently than dividends.
The model upgraded children's clothing designer
: Second-quarter net income quadrupled to $11 million and earnings per share tripled to 29 cents as revenue grew 5% to $325 million. The operating margin rose from 4% to 7% and the net margin climbed from 1% to 3%. Carter has a strong cash position, with $173 million of reserves and a quick ratio of 1.7. A debt-to-equity ratio of 0.7 indicates reasonable leverage.
: Carter's has increased 34% this year, beating major U.S. indices. The stock trades at a fair price-to-earnings ratio of 17, but doesn't pay dividends.
The model downgraded risk and investment management consultant
Marsh & McLennan Companies
: The company swung to a second-quarter net loss of $193 million, or 31 cents a share, from a profit of $65 million, or 10 cents a share, in the year-earlier period as revenue fell 14% to $2.6 billion. The operating margin ascended from 11% to 13%, but the net margin descended from 2% into negative territory. Despite the weak operating performance, Marsh has a strong financial position, as evident in a high quick ratio of 1.6 and a low debt-to-equity ratio of 0.6.
: Marsh & McLennan has declined 7% this year, underperforming major U.S. indices. The stock trades at an exorbitant price-to-earnings ratio of 35, but offers an attractive 3.5% dividend yield.
-- Reported by Jake Lynch in Boston