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 18.

Bank of New York Mellon ( BK) was downgraded to hold from buy Friday. The bank is a financial services company which provides numerous services and products for individuals as well as institutions internationally. 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.

BK's very impressive revenue growth has greatly exceeded the industry average of 49.9%. Since the same quarter one year prior, revenues have jumped by 62.5%. 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. The debt-to-equity ratio is somewhat low, currently at 0.68 and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.

The Bank of New York Mellon has experienced a steep decline in earnings per share in the most-recent quarter in comparison to its performance from the same quarter a year ago. 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, BK increased its bottom line by earning $2.40 vs. $2.06 in the prior year. This year, the market expects an improvement in earnings ($3.00 vs. $2.40).

The share price of the bank has not done very well: it is down 24.19% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to 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.

Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared with other companies in the Capital Markets industry and the overall market, Bank of New York Mellon's ROE is below that of both the industry average and the S&P 500. BK had been rated a buy as of July 17, 2006.

Downgraded to hold from buy was CACI International ( CAI). CACI is an information technology and communications solutions provider worldwide. 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.

CACI's revenue growth came in higher than the industry average of 4.7%. Since the same quarter one year prior, revenues rose by 34.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CAI has a quick ratio of 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.

CACI International has improved earnings per share by 23.7% in the most-recent quarter compared with the same quarter a year ago. 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, CACI reported lower earnings of $2.51 vs. $2.74 in the prior year. This year, the market expects an improvement in earnings ($2.72 vs. $2.51).

The gross profit margin for CACI International is currently lower than what is desirable, coming in at 33.00%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.50% significantly trails the industry average.

The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the IT Services industry and the overall market, CACI's ROE is significantly below that of the industry average and is below that of the S&P 500. CACI International had been rated a buy as of May 2, 2008.

Taking a downgrade to sell from hold was Palm ( PALM). Palm is a manufacturer of mobile products for business and individual customers internationally. Its rating is driven by several weaknesses, which we believe should have a greater impact than any strengths and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 367.5% when compared with the same quarter one year ago, falling from $15.35 million to -$41.07 million.

The debt-to-equity ratio of 1.09 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, PALM maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.

Return on equity has greatly decreased when compared with its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared with other companies in the Computers & Peripherals industry and the overall market, Palm's ROE significantly trails that of both the industry average and the S&P 500.

The gross profit margin for Palm is currently lower than what is desirable, coming in at 27.80%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -13.90% is significantly below that of the industry average.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 65.18%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 366.66% compared with 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. Palm had been rated a hold as of June 27, 2008.

US Cellular ( USM) experienced a downgrade to hold from buy Friday. USM is a wireless services provider that owns and invests in wireless markets. 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.

US Cellular's revenue growth significantly trails the industry average of 96.8%. Since the same quarter one year prior, revenues rose by 11.0%. 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.

The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.78 is somewhat weak and could be cause for future problems.

Net operating cash flow has declined marginally to $229.80 million, or 9.90%, when compared with the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared with the Wireless Telecommunication Services industry average, but is greater than that of the S&P 500. The net income has decreased by 5.2% when compared to the same quarter one year ago, dropping from $74.40 million to $70.56 million. USM had been rated a buy as of July 17, 2006.

Westamerica Bancorp ( WABC) was downgraded to hold from buy on July 18. The provider of banking services in northern and central California principally deals with generating deposits and originating loans. 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.

The gross profit margin for WABC is currently very high, coming in at 81.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.00% significantly outperformed against the industry average.

Westamerica Bancorp's revenue fell significantly faster than the industry average of 23.3%. Since the same quarter one year prior, revenues fell by 34.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared with the Commercial Banks industry average, but is greater than that of the S&P 500. The net income has significantly decreased by 45.4% when compared with the same quarter one year ago, falling from $22.35 million to $12.20 million. WABC had been rated a buy as of February 14, 2008.

Additional ratings changes from July 18 are listed below.
Ticker Company Name Change New Rating Former Rating
AEE Ameren Corp. Downgrade Hold Buy
BK Bank Of New York Mellon Corp. Downgrade Hold Buy
BKR Michael Baker Corp. Upgrade Buy Hold
BTUI BTU International Inc. Downgrade Hold Buy
CAI CACI International Inc. Downgrade Hold Buy
CCOI Cogent Communications Group Downgrade Sell Hold
CHB Champion Enterprises Inc. Downgrade Sell Hold
DTLK Datalink Corp. Upgrade Buy Hold
EE El Paso Electric Co. Downgrade Hold Buy
EVK Ever-Glory International Group Inc. Initiated Hold
HKN HKN Inc. Upgrade Buy Hold
MEDQ MedQuist Inc. Downgrade Sell Hold
MRY Memry Corp. Upgrade Buy Hold
NTSC National Technical Systems Inc. Downgrade Hold Buy
OEH Orient-Express Hotels Downgrade Hold Buy
OSHC Ocean Shore Holding Co. Upgrade Hold Sell
PALM Palm Inc. Downgrade Sell Hold
PZZI Pizza Inn Inc. Upgrade Hold Sell
SPPR Supertel Hospitality Inc. Downgrade Sell Hold
TCAP Triangle Capital Corp. Initiated Hold
TEC Teton Energy Corp. Downgrade Sell Hold
TSTY Tasty Baking Co. Downgrade Sell Hold
TSYS TeleCommunication Systems Inc. Upgrade Buy Hold
USM US Cellular Corp. Downgrade Hold Buy
VTIV inVentiv Health Inc. Downgrade Hold Buy
WABC Westamerica Bancorp. Downgrade Hold Buy
This article was written by a staff member of TheStreet.com Ratings.

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