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 Sept. 8.

Kohl's ( KSS) has been upgraded from hold to buy. Kohl's Corporation operates a chain of departmental stores in the U.S. The company offers apparel, footwear and accessories for women, men and children, as well as soft home products, such as sheets and pillows and housewares through its stores and online. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Despite its growing revenue, the company underperformed as compared with the industry average of 7.1%. Since the same quarter one year prior, revenue has slightly increased by 3.8%. 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.

Its gross profit margin is 39.60%, which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.30% is above that of the industry average.

The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.15 is very weak and demonstrates a lack of ability to pay short-term obligations.

KSS' earnings per share declined by 7.2% 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, KSS has increased its bottom line by earning $3.39 vs. $3.33 in the prior year. For the next year, the market is expecting a contraction of 8.3% in earnings ($3.11 vs. $3.39).

The change in net income from the same quarter one year ago has exceeded that of the S&P 500 but is less than that of the multiline retail industry average. The net income has decreased by 12.3% when compared with the same quarter one year ago, dropping from $269.22 million to $236.02 million.

KSS had been rated a hold since Nov. 27, 2007.

Farmers Capital Bank ( FFKT) has been upgraded from hold to buy. Farmers Capital Bank, a financial holding company, offers banking and bank-related services to individuals, corporations and other customers in central and northern Kentucky. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

FFKT has improved earnings per share by 8.1% 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 year. We feel that this trend should continue. During the past fiscal year, FFKT has increased its bottom line by earning $2.01 vs. $1.83 in the prior year. Thisyear, the market expects an improvement in earnings ($2.34 vs. $2.01).

FFKT's revenue growth trails the industry average of 11.9%. Since the same quarter one year prior, revenue has slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

The gross profit margin for FFKT is rather high; currently it is at 59.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.90% is above that of the industry average.

Compared with where it was trading a year ago, FFKT's share price has not changed very much due to the relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

The return on equity has improved slightly when compared with the same quarter one year prior. This can be construed as a modest strength in the organization. Compared with other companies in the commercial banks industry and the overall market on the basis of return on equity, FFKT has outperformed in comparison with the industry average, but has underperformed when compared with that of the S&P 500.

FFKT had been rated a hold since April 17, 2007.

WebMD Health ( WBMD) has been upgraded from sell to hold. WebMD Health provides health information services to consumers, physicians, health care professionals, employers and health plans through its public and private online portals, and health-focused publications primarily in the U.S. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

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 Internet software & services industry average. The net income increased by 17.8% when compared with the same quarter one year prior, going from $5.39 million to $6.35 million.

WBMD's revenue growth trails the industry average of 36.8%. Since the same quarter one year prior, revenue rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

The gross profit margin for WBMD is rather high; currently it is at 63.30%. It has increasedfrom the same quarter the previous year. Despite the strong results of the gross profit margin, WBMD's net profit margin of 7.10% significantly trails the industry average.

WBMD's share price has done very poorly compared with where it was a year ago. Despite any rallies, the net result is that it is down by 44.85%, which is also worse than the performance of the S&P 500. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, WBMD is still more expensive than most of the other companies in its industry.

Net operating cash flow has decreased to $28.07 million or 11.93% when compared to the same quarter last year. In addition, when comparing it with the industry average, the firm's growth rate is much lower.

WBMD had been rated a sell since Oct. 31, 2006.

ADCT Telecommunications has been downgraded from hold to sell. ADC Telecommunications, provides broadband communications network infrastructure productsand related services worldwide. It offers solutions that deliver Internet, data, video and voicecommunications over wireline, wireless, cable, enterprise and broadcast networks. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

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. Compared with other companies in the communications equipment industry and the overall market, ADCT's return on equity significantly trails that of both the industry average and the S&P 500.

Looking at the price performance of ADCT's shares over the past 12 months, there is not much good news to report: the stock is down 45.16%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the communications equipment industry average. The net income has decreased by 9.0% when compared with the same quarter one year ago, dropping from $16.60 million to $15.10 million.

36.80% is the gross profit margin for ADCT, which we consider to be strong. Regardless of ADCT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ADCT's net profit margin of 3.90% is significantly lower than the same period one year prior.

ADCT'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. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.51 is very high and demonstrates very strong liquidity.

ADCT had been rated a hold since Jan. 15, 2008.

MDS ( MDZ) has been downgraded from hold to sell. MDS, a life sciences company, provides products and services for the development of drugs, and the diagnosis and treatment of diseases. It operates in three segments: pharmaceutical research services, isotopes and molecularimaging, and analytical instruments. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, feeble growth in its earnings per share, deteriorating net income and poor profit margins.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: It has tumbled by 29.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 233.33% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared with its current earnings) than most other companies in its industry.

MDZ has experienced a steep decline in earnings per share in the most-recent quarter in comparison with its performance from the same quarter a year ago. The company has suffered a declining pattern in earnings per share over the past two years. During the past fiscal year, MDZ swung to a loss, reporting -22 cents vs. 23 cents in the prior year.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared with that of the S&P 500 and the life sciences tools & services industry. The net income has significantly decreased by 242.8% when compared with the same quarter one year ago, falling from $7.00 million to -$10.00 million.

The gross profit margin for MDZ is currently lower than what is desirable, coming in at 32.70%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.10% is significantly below that of the industry average.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared with other companies in the life sciences tools & services industry and the overall market, MDZ's return on equity significantly trails that of both the industry average and the S&P 500.

MDZ had been rated a hold since Jan. 25, 2007.

Additional ratings changes from Sept. 8 are listed below.
Ticker Company Name Change New Rating Former Rating
ADCT ADC Telecommunications Inc. Downgrade Sell Hold
FFKT Farmers Capital Bank Upgrade Buy Hold
KSS Kohl's Corp. Upgrade Buy Hold
MDZ MDS Inc. Downgrade Sell Hold
SGC Superior Uniform Group Inc. Upgrade Buy Hold
TO Tech/Ops Sevcon Inc. Downgrade Hold Buy
WBMD WebMD Health Corp Upgrade Hold Sell

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

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