Each business day, 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.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could impact the stock's price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.

Wells Fargo ( WFC), a financial services company, has been downgraded to hold. Fourth-quarter net income dropped to its lowest level in six years due to turmoil in the U.S. mortgage market. Income dropped 38% from a year ago to $1.36 billion, and earnings per share sank to 41 cents from 64 cents. Net revenue for the quarter increased 8.4% to a record $10.21 billion, aided by strong volume growth in loans, deposits, and fee-based products. Provision for credit losses surged significantly to $2.61 billion from $726 million a year ago, as a result of higher delinquencies in the home equity, credit card and auto businesses. Net charge-offs, as a percentage of average total loans, moved up 36 basis points to 1.28% from 0.92%. For the year, net income declined 4.3% to 8.06 billion, while net revenue increased 10% to a record $39.39 billion. Provisions for credit losses surged 124% to $4.94 billion. Wells Fargo had been rated buy since March 2006.

Air carrier JetBlue Airways ( JBLU) has been downgraded to sell. The company's weaknesses can be seen in several areas, such as its inadequate debt management, feeble operating cash flow, generally disappointing historical stock performance and poor profit margins. The debt-to-equity ratio is very high at 2.95, implying poor management of debt levels. The company swung to a third-quarter profit of $23 million, or 12 cents a share, compared with a loss of $500,000 and break-even EPS a year ago. The firm's growth rate is much lower than the industry average. This stock's share value has dropped over the past year. Despite the heavy decline in its share price, this stock is still more expensive than most other companies in its industry. On a positive note, the company's current return on equity greatly increased from a year ago, a signal of significant strength within the corporation. However, JetBlue's ROI significantly trails the industry average. JetBlue Airways had been rated hold since July.

Home Inns & Hotels Management ( HMIN), which manages economy hotel chains in China, has been downgraded to sell. The company's weaknesses include the generally disappointing stock performance; despite any rallies over the past year, the net result is a share price decrease of 34%. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive -- when compared with its current earnings -- than most other companies in its industry. Its debt-to-equity ratio is very low at 0.01 and is currently below the industry average, implying very successful management of debt levels. The company reported significant EPS improvement in the most recent quarter over a year ago, and the market expects an improvement in earnings this year. Home Inns & Motels Management was initiated in November with a hold rating.

Knight Capital Group ( NITE), a financial services company, has been upgraded to buy. The company maintains a largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, expanding profit margins and growth in net income and EPS. These strengths should outweigh the stock's lackluster performance. Fourth-quarter net income increased 4.5% from the same period last year to $49.6 million, significantly exceeding the capital markets industry. EPS increased 16% to 52 cents a share. Excluding items, EPS totaled 50 cents for the latest quarter. Revenue totaled $257.3 million, compared with $261.5 million a year ago. This company has reported somewhat volatile earnings recently, but TheStreet.com Ratings believes it is poised for EPS growth in the coming year. The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Knight Capital Group had rate been hold since September.

Additional ratings changes are listed below.

StockUpgrades, Downgrades
Ticker Company Name Change New Rating Former Rating
ARJ Arch Chemicals Downgrade Hold Buy
DPW Digital Power Downgrade Sell Hold
DTG Dollar Thrifty Automotive Downgrade Sell Hold
FC Franklin Covey Upgrade Buy Hold
EXH Exterran Holdings Downgrade Hold Buy
HRZB Horizon Financial Downgrade Hold Buy
NITE Knight Capital Upgrade Buy Hold
MCRI Monarch Casino Downgrade Hold Buy
MNRO Monro Muffler Brake Downgrade Hold Buy
NBTB NBT Bancorp Downgrade Hold Buy
OMN Omnova Solutions Downgrade Sell Hold
SLP Simulations Plus Downgrade Hold Buy
STC Steward Information Services Downgrade Sell Hold
TDK TDK Downgrade Hold Buy
TRMK Trustmark Downgrade Hold Buy
TTG Tutogen Downgrade Hold Buy
WFC Wells Fargo Downgrade Hold Buy
CVGW Calavo Growers Upgrade Buy Hold
JBLU JetBlue Airways Downgrade Sell Hold
JAS Jo-Ann Stores Downgrade Sell Hold
PRPX Portec Rail Downgrade Hold Buy
GASS Stealthgas Initiation Sell n/a
APKT Acme Packet Downgrade Sell Hold
HMIN Home Inns & Hotel Mgmt Downgrade Sell Hold
FRPT Force Protection Downgrade Sell Hold
Source: TheStreet.comRatings

This article was written by a staff member of TheStreet.com Ratings.

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