Ratings Changes: Cisco, Procter & Gamble - TheStreet

Ratings Changes: Cisco, Procter & Gamble

TheStreet.com Ratings has upgraded Cisco, Procter & Gamble and 3M.
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BOSTON (

TheStreet

) -- TheStreet.com's stock-picking model upgraded networking-equipment giant

Cisco

(CSCO) - Get Report

to "buy."

The numbers

: Fiscal third-quarter revenue decreased 17% to $8.2 billion as net income fell 24% to $1.3 billion and earnings per share fell 21% to 23 cents, helped by a lower share count. The operating margin expanded from 20% to 22%, but the net margin dropped from 18% to 17%. Cisco's debt load has increased 49% from the year-ago quarter, but a debt-to-equity ratio of 0.3 demonstrates a conservative capital structure. And a quick ratio of 2.9 indicates strong liquidity.

The stock

: Cisco is up 33% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 18, a modest premium on the market, and doesn't pay dividends. The company will benefit from a rebound in tech spending as the global economy recovers.

The model upgraded media company

Discovery Communications

(DISCA) - Get Report

to "hold." The company runs television networks including the Discovery Channel, TLC and Animal Planet.

The numbers

: First-quarter revenue inched up 1% to $817 million as net income tripled to $119 million. However, earnings per share climbed just 17% due to a significantly higher share count. The operating margin strengthened from 30% to 33% and the net margin improved from 4% to 15%. The company has added $3.7 billion of debt since the year-ago quarter, when the balance stood at zero. But a debt-to-equity ratio of 0.8 indicates reasonable leverage. With only $142 million of cash and a quick ratio of 0.8, Discovery's liquidity position is less than ideal.

The stock

: Discovery has climbed 68% this year, outperforming major U.S. indices. The stock is trading at an expensive price-to-earnings ratio of 25 and doesn't pay dividends.

The model upgraded

Juniper Networks

(JNPR) - Get Report

to "buy." The company sells computer networking equipment.

The numbers

: Second-quarter revenue dropped 11% to $786 million as net income plummeted 88% to $15 million and earnings per share dropped 86% to 3 cents, cushioned by a lower share count. The operating margin declined from 19% to 13% and the net margin decreased from 14% to 2%. Juniper has a sturdy financial position, with nearly $2 billion of cash and no debt, amounting to a high quick ratio of 2.3.

The stock

: Juniper has gained 48% this year, outperforming major U.S. indices. The stock trades at an exorbitant price-to-earnings ratio of 36 and doesn't pay dividends. Like Cisco, Juniper is poised to benefit from a rebound in technology investing.

The model upgraded industrial conglomerate

3M

(MMM) - Get Report

to "buy."

The numbers

: Second-quarter revenue fell 15% to $5.7 billion as net income dropped 17% to $783 million. Earnings per share declined 16% to $1.12, helped by a lower share count. The operating margin increased from 22% to 23% and the net margin hovered around 14%. A debt-to-equity ratio of 0.5 and quick ratio of 1.2 indicate a conservative financial position. We give 3M an overall financial strength score of 7.2 out of 10, which is higher than our "buy"-rated average.

The stock

: 3M has increased 21% this year, outperforming the

Dow Jones Industrial Average

and

S&P 500

. The stock trades at a fair price-to-earnings ratio of 16 and offers a 2.9% dividend yield.

The model upgraded household products maker

Procter & Gamble

(PG) - Get Report

to "buy."

The numbers

: Fiscal third-quarter revenue dropped 8% to $18 billion as net income fell 4% to $2.6 billion. Earnings per share increased 4% to 83 cents because of a lower share count. The operating margin remained stable at 25% and the net margin inched up from 13% to 14%. The company has a weak liquidity position, reflected by a low quick ratio of 0.3. However, a debt-to-equity ratio of 0.6 indicates well-managed leverage.

The stock

: Procter & Gamble is down 10% this year, underperforming the Dow and S&P 500. The stock trades at a fair price-to-earnings ratio of 15 and offers an attractive 3.2% dividend yield.

-- Reported by Jake Lynch in Boston. Feedback can be sent to jake.lynch@thestreet.com.