TSC Ratings' Updates: Clear Channel Outdoor Holdings

Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stocks total return potential over a 12-month period, including both prices 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 16.

Telecommunications Systems ( TSYS), a wireless data communications company, has been upgraded to hold. Revenue growth beat the industry average, with revenue increasing 21% from the same quarter last year. Net income also increased significantly from the same quarter last year, shooting up 152%. One concern is a slightly high debt-to-equity ratio of 0.37, indicating that further evaluation of debt level management is needed. Share value has declined over the past 12 months by 2%, meaning there is not enough justification for anything more than a hold rating at this point. Telecommunications Systems had been rated sell since ratings were initiated on July 14, 2006.

Outdoor advertising company Clear Channel Outdoor Holdings ( CCO) has been downgraded to sell. Compared to a year ago, the stock share price has done very poorly, falling 56% despite market rallies. Net operating cash flow has decreased by 36% compared to the same quarter a year ago, and debt-to-equity ratio is a worse-than-average 1.21. The company has reported increased earnings per share in the most-recent quarter; however, analysts predict underperformance in the coming year. Clear Channel Outdoor had been rated hold since August 15, 2007.

Fuel Tech ( FTEK), which provides engineering solutions for solid waste systems, has been downgraded to hold. Revenue growth was higher than the industry average, with revenue increasing by 26% compared with the same quarter one year prior. Return on equity has slightly decreased from one year ago, implying a minor weakness in the organization. Debt-to-equity ratio, however, is very low at 0.03 and shows a successful management of debt levels. Fuel Tech had been rated buy since March 26.

Worldwide financial holding corporation JPMorgan Chase ( JPM) has been downgraded to hold. Net operating cash flow has increased by 95% from the same quarter last year, slightly beating the industry average. Gross profit margin is also strong at 46%. Current return on equity has slightly decreased from last year, showing a minor weakness in the company. At 3.80, the debt-to-equity ratio is very high, implying a poor management of debt levels within the company. JPMorgan had been rated buy since April 17.

Merchandise and food store brand Target ( TGT) has been downgraded to hold. Since the same quarter one year ago, revenues increased by 5% but did not beat the industry average. Return on equity has also increased slightly compared to the same quarter last year. Gross profit margin is 33%, which is lower than desirable but still an increase from last year. Over the past 12 months, however, the stock has fallen 37% and underperformed the S&P 500 Index. Target had been rated buy since ratings were initiated on July 14, 2006.

Additional ratings changes from July 16 are listed below.

Ticker Company Name Change New Rating Former Rating
ACW Accuride Corporation Downgrade Sell Hold
CCO Clear Channel Outdoor Holdings Downgrade Sell Hold
FLXS Flexsteel Industries Inc. Downgrade Hold Buy
FTEK Fuel Tech Inc. Downgrade Hold Buy
JPM JPMorgan Chase & Company Downgrade Hold Buy
MERR Merriman Curhan Ford Group Downgrade Sell Hold
NDAQ NASDAQ OMX Group Inc. Downgrade Hold Buy
NSFC Northern States Financial Cp. Downgrade Hold Buy
PBG Pepsi Bottling Group Inc. Downgrade Hold Buy
TGT Target Corp. Downgrade Hold Buy
TIS Orchids Paper Products Upgrade Buy Hold
TSYS Telecommunication Sys Inc. Upgrade Hold Sell
TVL Lin TV Corp. Downgrade Sell Hold
USB U.S. Bancorp Downgrade Hold Buy

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

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