Each weekday, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates. While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows. Pharmaceutical giant Pfizer ( PFE) has been downgraded to a hold from a buy. The company's primary strength is its expanding profit margins. However, the company saw EPS decline by 38.7% in the second quarter compared with the same period a year ago, and net income decreased by 47.5% over the same time frame. Pfizer's stock has sunk by 7.69% in the last 12 months and is selling for less than others in its industry in relation to its current earnings. However, this weakness in the stock price does not justify a buy rating at this time. Pfizer had been rated a buy since August 2006. Investment bank Goldman Sachs ( GS) has been downgraded to a hold from a buy. The company's strengths are seen in its revenue growth, notable return on equity and attractive valuation levels. As a counter to these strengths, TheStreet.com Ratings finds weak operating cash flow.
Goldman's debt-to-equity ratio of 15.29 is higher than that of the industry, implying very poor management of debt levels within the company. The ratings change occurred prior to the firm's announcement Monday morning that outside investors would join the company in adding $3 billion to bail out its struggling Global Equity Opportunities fund. The company had been rated a buy since March 2006. Archstone-Smith Trust ( ASN) owns, develops, acquires and operates income-producing apartment communities. It has been downgraded to a hold from a buy. The company has shown robust revenue growth, reasonable debt levels by most measures and a 12.28% increase in its stock price over the past year. However, it also shows a disappointing return on equity and poor profit margins. In the most recent quarter, EPS sunk by 63.08% to $2.72 per share, from $3.28 per share in the second quarter of 2006. Archstone-Smith had been rated a buy since April 2006. Agrium ( AGU) produces and markets agricultural nutrients and specialty fertilizers. It has been upgraded to a buy from a hold. The company shows revenue growth, a largely solid financial position with reasonable debt levels by most measures, solid stock price performance and EPS growth of 60.37% in the second quarter compared with the same period last year. Over the same timeframe, net income increased 61.26% to $229 million. Strengths like these outweigh the company's somewhat disappointing return on equity. Agrium's strong earnings growth has boosted the company's share price by 60.37% over the past 12 months, driving it to a price that is relatively more expensive compared with the rest of its industry. Still, the higher price is justified. Automaker DaimlerChrysler ( DAI) has been downgraded to a hold from a buy. The company has shown an impressive record of EPS growth, and its stock price has increased by 65.06% in the last year. Also, its net income increased by 618.15% in the first quarter of fiscal 2007 compared with the same period last year. In the past fiscal year, the company increased its bottom line by earning $4.14 versus $3.31 in the prior year. As a counter to these strengths, DaimlerChrysler shows generally poor debt management and poor profit margins. Its debt-to-equity ratio of 2.43 is above that of the industry average. The company had been rated a buy since August 2006. Additional ratings changes are listed below.
|Stock Upgrades, Downgrades |
|Company Name||Ticker||Change||New Rating||Former Rating|
|Advanced Energy Industries||AEIS||Downgrade||Hold||Buy|
|California Water Service Group||CWT||Upgrade||Buy||Hold|
|Allied Motion Technologies||AMOT||Downgrade||Hold||Buy|
|MTS Medication Technologies||MPP||Downgrade||Hold||Buy|
|On Track Innovations||OTIV||Downgrade||Sell||Hold|
|Natural Resource Partners||NSP||Upgrade||Buy||Hold|
|Boardwalk Pipeline Partners||BWP||Upgrade||Hold||Sell|
|Source: TheStreet.com Ratings|