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 28. Quest Diagnostics ( DGX), together with its subsidiaries, provides diagnostic testing, information and services in the U.S. DGX has been upgraded to buy. With strong top-line growth, Quest Diagnostics' second-quarter fiscal-year 2008 net sales advanced 12%, with the AmeriPath acquisition contributing about 8% to the growth. Revenue increased to $1.84 billion from $1.64 billion a year ago.
Although gross profit margin expanded marginally in the year-ago quarter and the operating margin did not decline, the net income soared 14% to $161.33 million, or 83 cents per share, from $141.33 million, or 73 cents per share, in the prior-year quarter. Recently, DGX entered the Indian insurance sector. By becoming the sole provider of health assessment services for Birla Sun Life Insurance Co. Ltd., India, the Indian insurance sector's premium market is expected to more than double to between $80 billion and $100 billion by 2012. Furthermore, DGX raised its fiscal-year 2008 earnings per share from continuing operations guidance to be in the range of $3.10 to $3.20 per share from its previous guidance of $3.00 to $3.20 per share, along with a revenue growth of about 9% year over year. DGX has been rated hold since March 2008. Agnico-Eagle Mines ( AEM), through its subsidiaries, engages in the exploration and development of gold. AEM has been downgraded to hold. The net income has significantly decreased by 78% when compared with the same quarter one year ago, falling from $37.8 million to $8.4 million. The company's current return on equity slightly decreased from the same quarter one year prior. Compared with its closing price of one year ago, AEM's share price has jumped by 43%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we believe that the stock's sharp appreciation over the last year has driven it to a price level that is now relatively expensive compared with the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time. AEM has been rated a buy since July 2006.
Black Hills ( BKH), together with its subsidiaries, operates as a diversified energy company primarily in the U.S. The company operates through two groups: Utilities and Non-Regulated Energy. BKH has been downgraded to hold. 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, BKH increased its bottom line by earning $2.68 vs. $2.20 in the prior year. For the next year, the market is expecting a contraction of 6.7% in earnings ($2.50 vs. $2.68). The net income has significantly decreased by 48% when compared with the same quarter one year ago, falling from $32.5 million to $16.8 million. The share price of BKH is down 15% 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 observe anything in the company's numbers that may help reverse the decline experienced over the past 12 months. BKH has been rated a buy since July 2006. Citrix Systems ( CTXS) designs, develops and markets application delivery infrastructure solutions worldwide. CTXS has been downgraded to hold. Since the same quarter one year prior, revenue rose by 17%. CTXS has no debt to speak of, resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
CTXS earnings per share declined by 38% in the most-recent quarter compared with the same quarter a year ago. This company has reported somewhat volatile earnings recently. The net income has significantly decreased by 35% when compared with the same quarter one year ago, falling from $53.4 million to $34.7 million. 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. CTXS has been rated a buy since July 2006. Data Domain ( DDUP) provides duplication storage appliances for disk-based backup, archiving and network-based disaster recovery. The company's appliances reduce the storage of redundant copies of data within enterprises. Data Domain has been initiated as a sell. DDUP is off 11% from its price level of one year ago, reflecting the general market trend and ignoring their higher earnings per share compared with the year-earlier quarter. 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. Net operating cash flow has improved to $7.8 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average. DDUP has not been previously rated. Additional ratings changes are listed below.
|Ticker||Company Name||Change||New Rating||Former Rating|
|AEM||Agnico Eagle Mines||Downgrade||Hold||Buy|
|ALJ||Alon USA Energy||Upgrade||Hold||Sell|
|APII||Action Products International||Upgrade||Hold||Sell|
|CHIC||Charlotte Russe Holdings||Downgrade||Hold||Buy|
|FRGB||First Refional Bancorp||Downgrade||Sell||Hold|
|SCMF||Southern Community Financial||Downgrade||Sell||Hold|