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 25. Autoliv ( ALV) through its subsidiaries, develops, manufactures and supplies automotive safety systems to automotive industry. ALV has been downgraded to hold. The company's second quarter fiscal year 2008 revenue rose 10% year over year to $1.91 billion, driven by acquisition and favorable currency gains. Product-wise, airbag revenue spurred 7% to $1.21 billion, contributed by 9% growth from favorable currency translations. Sales from seat belt products spiked 16% to $700.30 million, due to 12% growth from favorable currency translations and 2% from AIN-acquisition. Furthermore, sales from Europe, Japan and the rest of World surged 15%, 28% and 25%, respectively.
During the quarter under review, net income grew 57% to $90.4 million or $1.24 per share from $57.5 million or 72 cents per share, on favorable foreign currency translations and revenue growth outside North America. The seatbelt segment, accounting for 37% of total revenue and soared 16% to $700 million, owing to favorable currency translations and acquisitions. Return on asset and equity respectively declined 93 and 104 basis points year over year. The North American and Western European light vehicle production, which accounts for 70% of total revenue, is expected to decline 12% and 5%, respectively, which could negatively impact sale of airbags, although other markets continue to expand. ALV has been rated a buy since July 2006. BOK Financial ( BOKF), a financial holding company, provides various financial products and services in the United States. It operates in five segments: Oklahoma Corporate Banking, Oklahoma Consumer Banking, Mortgage Banking, Wealth Management and Regional Banking. BOKF has been downgraded to hold. The gross profit margin for BOKF is rather high; currently it is at 62%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12% is above that of the industry average. BOKF, with its decline in revenue, underperformed when compared with the industry average of 25%. Since the same quarter one year prior, revenue slightly dropped by 4%. BOKF earnings per share declined by 19% in the most-recent quarter compared with the same quarter a year ago.
This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BOKF increased its bottom line by earning $3.23 vs. $3.16 in the prior year. For the next year, the market is expecting a contraction of 4% in earnings ($3.12 vs. $3.23). The net income has decreased by 19% when compared with the same quarter one year ago, dropping from $53.9 million to $43.7 million. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last 12 months; and it could be down again in the next 12. BOKF has been rated a buy since July 2006. Lincoln National ( LNC), through its subsidiaries, engages in multiple insurance and investment management businesses primarily in the U.S. LNC has been downgraded to hold. Despite the weak revenue results, LNC has outperformed against the industry average of 24%. Since the same quarter one year prior, revenue slightly dropped by 4%. Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. The gross profit margin for LNC is rather low; currently it is at 25%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 12% is above that of the industry average. Net operating cash flow has significantly decreased to $98 million, or 79%, when compared with the same quarter last year. In addition, when comparing with the industry average, the firm's growth rate is much lower. LNC has been rated a buy since July 2006.
Mirant ( MIR) produces and sells electricity in the U.S. It generates electricity through coal-fired, and oil and gas generating facilities. MIR has been downgraded to hold. Net operating cash flow has remained constant at $252 million with no significant change when compared with the same quarter last year. In addition, MIR has modestly surpassed the industry average cash flow growth rate of -8%. MIR, with its decline in revenue, slightly underperformed the industry average of 4%. Since the same quarter one year prior, revenue fell by 14%. The share price of MIR is down 21% when compared with where it was trading one year earlier. This reflects both the trend in the overall market as well as the sharp decline in the company's earnings per share. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry. MIR has been rated a buy since May 2008. Newfield Exploration ( NFX), an independent oil and gas company, engages in the exploration, development and acquisition of natural gas and crude oil properties primarily in the United States. NFX has been downgraded to hold. NFX's revenue growth has slightly outpaced the industry average of 31%. Since the same quarter one year prior, revenue rose by 32%. The gross profit margin for NFX is currently very high, coming in at 84%. It has increased from the same quarter the previous year. Net operating cash flow has significantly decreased to -$100 million, or 133%, when compared with the same quarter last year. In addition, when comparing the firm's growth rate with the industry average, the firm's rate is much lower. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock. Return on equity has greatly decreased when compared with its return on equity from the same quarter one year prior. This is a signal of major weakness within the corporation. NFX has been rated a buy since May 2008. Additional ratings changes are listed below.
|Ticker||Company Name||Change||New Rating||Former Rating|
|BFBC||Benjamin Franklin Bancorp||Upgrade||Hold||Sell|
|EMCI||EMC Insurance Group||Downgrade||Hold||Buy|
|NETC||Net Servicos Comunicacao||Upgrade||Hold||Sell|
|PDS||Precision Drilling Trust||Downgrade||Hold||Buy|