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 affect the stock 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 that it should be part of an investor's overall research.

The following ratings changes were generated on Feb. 28.

Companhia de Bebidas Das Americas ( ABV), a producer of beer, soft drinks and nonalcoholic and noncarbonated products also known as Ambev, has been upgraded to buy. For the third quarter, revenue rose 39% year over year to $2.77 billion, and earnings per share climbed to 57 cents from 34 cents over the same period. This year, the market expects a full-year EPS improvement to $2.87 from $2.04. Net income increased 57% from the year-ago quarter to $350.3 million. Ambev's gross profit margin of 67% is very high, but its net profit margin, at 13%, trails the industry average.

Powered by strong earnings growth and other factors, shares have surged 82% over the past year. With a price-to-earnings ratio of 37.07, the stock is more expensive than others in its industry. The company's other strengths, however, justify the premium. CIA de Bebidas das Americas had been rated hold since Jan. 15.

Adtran ( ADTN), a provider of network access solutions for copper, fiber and wireless networks in the U.S., has been downgraded to hold. Strengths such as increasing earnings per share and revenue growth are balanced by weak operating cash flow and a disappointing stock-price performance. For the fourth quarter, EPS jumped 13% year over year. For 2008, the market expects an improvement in full-year EPS to $1.25 over $1.10 in 2007.

Return on equity has improved to 20% from 18% year over year. Net operating cash flow has decreased 11% to $19.3 million from the year-ago quarter. In the past year, shares have declined 18%. With a price-to-earnings ratio of 17.2, the stock is cheaper than others in its space. However, this is not reason enough to justify a buy rating at this time. Adtran had been rated buy since June 1.

CNA Financial ( CNA - Get Report), which provides property and casualty insurance products in the U.S., has been downgraded to hold. Strong cash flow from operations is countered by deteriorating net income, disappointing return on equity and poor profit margins. Net operating cash flow has increased 12% to $526 million year over year.

For the fourth quarter, revenue fell 15% year over year to $2.41 billion, and EPS decreased to 59 cents from $1.32 in the same period. However, for 2008, the market expects a full-year EPS improvement to $4.05 from $3.15 in 2007.Return on equity has slightly decreased to 8.4% from 11% since the year-ago quarter and lags the industry average. At 10%, the company's gross profit margin is extremely low, and its net profit margin of 6.8% trails the industry average. CNA Financial had been rated buy since Sept. 14, 2006.

R.R. Donnelly ( RRD - Get Report), a provider of print and print-related services, has been downgraded to hold. Strengths, including robust revenue growth and good cash flow from operations, are balanced by deteriorating net income, poor debt management and disappointing return on equity. For the fourth quarter, revenue rose 25% year over year to $3.09 billion, but the company lost $1.37 a share, compared with a loss of a penny a share in the year-ago quarter. However, for 2008, the market expects a full-year EPS improvement to a profit of $3.15, compared with a loss of 26 cents in 2007. Net operating cash flow increased 17% to $393.9 million. Despite the increase, the company's cash flow rate lags the industry average.

Return on equity has greatly decreased year over year to -1.2% from 9.8%. This is a signal of major weakness within the corporation. At 25%, R.R. Donnelly's gross profit margin is lower than desirable, and its net profit margin of -9.5% significantly lags the industry average. R.R. Donnelly had been rated buy since TheStreet.com Ratings initiated coverage on Feb. 28, 2006.

Verizon ( VZ - Get Report), a telecom company, has been downgraded to hold. Strong revenue growth, good cash flow from operations and expanding profit margins are weighed down by a decline in the stock price during the past year, poor debt management and disappointing return on equity. For the fourth quarter, the company's year-over-year revenue growth of 5.5% significantly trailed the industry average of 84.7%. Earnings per share declined 22% year over year to 37 cents. For 2008, the market expects an improvement in full-year EPS to $2.67 versus $1.90 for 2007.

Verizon's share price has not changed much in the past year. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. Verizon had been rated buy since March 29, 2006.

Additional ratings changes from Feb. 28 are listed below.

Ticker Company Name Change New Rating Former Rating
ADTN ADTRAN INC Downgrade Hold Buy
HCKT HACKETT GROUP INC Upgrade Buy Hold
AXTI AXT INC Upgrade Buy Hold
CNA CNA FINANCIAL CORP Downgrade Hold Buy
ABV CIA DE BEBIDAS DAS AMERICAS Upgrade Buy Hold
CRWS CROWN CRAFTS INC Upgrade Buy Hold
RRD DONNELLEY (R R) & SONS CO Downgrade Hold Buy
INOD INNODATA ISOGEN INC Upgrade Buy Hold
PSA PUBLIC STORAGE Upgrade Buy Hold
RSYS RADISYS CORP Downgrade Sell Hold
SDIX STRATEGIC DIAGNOSTICS INC Upgrade Buy Hold
TGIS THOMAS GROUP INC Downgrade Hold Buy
TWI TITAN INTERNATIONAL INC Upgrade Buy Hold
VZ VERIZON COMMUNICATIONS INC Downgrade Hold Buy
VITL VITAL SIGNS INC Upgrade Buy Hold
WSH WILLIS GROUP HOLDINGS LTD Downgrade Hold Buy
OMCL OMNICELL INC Downgrade Hold Buy
DIVX DIVX INC Downgrade Sell Hold

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