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 July 11. Corus Entertainment ( CJR) recently was upgraded to buy from hold. This upgrade is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Corus operates as a media and entertainment company in Canada. CJR has improved earnings per share by 32.4% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, Corus Entertainment increased its bottom line by earning $1.24 versus 41 cents in the prior year. The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500 but is less than that of the Media industry average. The net income increased by 27.3% when compared with the same quarter one year prior, rising from $29.59 million to $37.67 million.
Despite its growing revenue, the company underperformed as compared with the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share. 47.10% is the gross profit margin for Corus which we consider to be strong. Regardless of CJR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Corus Entertainment's net profit margin of 18.10% compares favorably to the industry average. Corus had been rated a hold as of April 21, 2008. Experiencing a downgrade to hold from buy as of July 11, 2008 was Principal Financial Group ( PFG). Our rating is based on the strong performance of the company's U.S. Asset Accumulation and International Asset Management and Accumulation segments; however, there is major concern due to declining returns and turmoil in the securities markets - this may restrict its earnings in the future. Principal provides financial services in the U.S. and abroad. For the first quarter full year 2008, the company's U.S. Asset Accumulation segment reported revenue growth of 2.2% to $1.20 billion, fueled by a 5.9% rise in net investment income. Similarly, International Asset Management and Accumulation's operating revenue spiked 30.0% to $183.70 million on the back of higher yields on invested assets and strong growth in assets under management, coupled with favorable currency exchange rates in Brazil and Chile. Operating earnings for the latest first quarter inched up 1.9% to $241.30 million, or 92 cents per share from $236.80 million, or 87 cents per share a year earlier, boosted by higher operating earnings growth from the company's International Asset Management and Accumulation and Global Asset Management segments. However, net income dropped 31.3% to $182.40 million, or 67 cents per share, squeezed by net realized/unrealized capital losses during the quarter.
The company's total revenue dipped 6.0% due to a decrease in premiums revenue and realized/unrealized losses on investments during the quarter. In addition, declining returns and turmoil in the securities markets could lead investors to withdraw their investment or refrain from making new investments, which may reduce the company's net income, revenues and AUM. The company had a debt-to-equity ratio of 0.23, implying successful debt management. Furthermore, in June 2008, PFG was selected by Pizzagalli Construction to provide defined contribution plan and employee stock ownership plan (ESOP) services. This may improve the company's revenue in the upcoming quarters, even though the sector outlook for financials is extremely risky. PFG had been rated a buy since July 10, 2006. Reinsurance Group America ( RGA) was recently downgraded to hold from buy. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. RGA specializes in specific insurance policies internationally. Reinsurance's revenue growth came in higher than the industry average of 23.5%. Year-over-year, revenues slightly increased by 0.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. RGA has experienced a steep decline in earnings per share in the most- recent quarter compared with year-over-year results. This company has reported somewhat volatile earnings recently but we feel it is poised for EPS growth in the coming year.
During the past fiscal year, Reinsurance Group increased its bottom line by earning $4.79 versus $4.66 in the prior year. This year, the market expects an improvement in earnings ($5.75 vs. $4.79). RGA's debt-to-equity ratio of 0.63 is somewhat low overall but it is high when compared with the industry average, implying that the management of the debt levels should be evaluated further. The gross profit margin for Reinsurance is currently extremely low, coming in at 6.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.30% trails that of the industry average. Net operating cash flow has decreased to $188.52 million, or 34.52%, when compared with the same quarter last year. In conjunction, when comparing current results with the industry average, Reinsurance Group America has marginally lower results. RGA had been rated a buy as of July 10, 2006. Downgraded to sell from hold, as of Friday, was FCStone Group ( FCSX). This is driven by a few notable weaknesses, which we believe should have a greater impact than any strength and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. FCSX operates as an integrated commodity risk management company. Along with the very weak revenue results, FCSX underperformed when compared to the industry average of 49.2%. Year-over-year, revenues plummeted by 77.2%. The declining revenue has not hurt the company's bottom line with increasing earnings per share. The gross profit margin for FCStone is currently lower than what is desirable, coming in at 33.30%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, FCSX's net profit margin of 13.20% significantly outperformed against the industry. FCStone's stock share price has done very poorly compared to where it was a year ago.
Despite any rallies, the net result is that it is down by 54.01%, which is also worse than the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. FCStone Group reported significant earnings per share improvement in the most-recent quarter compared with the same quarter a year ago. This year, the market expects an improvement in earnings ($2.00 vs. $1.11). The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 75.1% when compared with the same quarter one year prior, rising from $6.92 million to $12.12 million. FCSX had been initiated to a hold since April 17, 2008. Allegiant Travel ( ALGT) was initiated to sell as of Friday. This is driven by some concerns, which we believe should have a greater impact than any strength, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Allegiant specializes in linking small cities to popular, domestic leisure destinations. The gross profit margin for ALGT is rather low; currently it is at 21.80%, decreasing from last year. Net operating cash flow has decreased to $43.82 million, or 17.91%, when compared with the same quarter last year. In addition, when comparing the cash generation rate with the industry average, the firm's growth is significantly lower. Looking at the price performance of ALGT's shares over the past 12 months, there is not much good news to report: the stock is down 42.28%, and it has underperformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter.
Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy. The change in net income from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Airlines industry. The net income has decreased by 0.8% when compared with the same quarter one year ago, dropping from $9.75 million to $9.67 million. Allegiant Travel's earnings per share from the most-recent quarter came in slightly below the year earlier quarter. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ALGT turned its bottom line around by earning $1.54 vs. -$0.11 in the prior year. For the next year, the market is expecting a contraction of 46.8% in earnings (82 cents vs. $1.54). Additional ratings changes from July 11, 2008 are listed below.
|Ticker||Company Name||Change||New Rating||Former Rating|
|ALDN||Aladdin Knowledge System Ltd.||Downgrade||Sell||Hold|
|ALGT||Allegiant Travel Co.||Initiated||Sell|
|CJR||Corus Entertainment Inc.||Upgrade||Buy||Hold|
|CPI||Capital Properties Inc.||Upgrade||Buy||Hold|
|EXFO||EXFO Electro Optical Engr.||Downgrade||Hold||Buy|
|FCSX||FCStone Group Inc.||Downgrade||Sell||Hold|
|PFG||Principal Financial Group Inc.||Downgrade||Hold||Buy|
|PVSA||Parkvale Financial Corp.||Downgrade||Hold||Buy|
|RGA||Reinsurance Group America Inc.||Downgrade||Hold||Buy|
|TLP||Transmontaigne Partners L.P.||Downgrade||Hold||Buy|
|XLTC||Excel Technology Inc.||Upgrade||Buy||Hold|