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. 11.

Limited Brands ( LTD) has been upgraded from hold to buy. Limited Brands operates as a specialty retailer of women's intimate apparel, apparel, beauty and personal care products, and accessories under various brand names. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and relatively strong performance when compared with the S&P 500 during the past year. We feel these strengths outweigh the fact that the company has had subpar growth in net income.

Net operating cash flow has increased to $359 million or 19.66% when compared with the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.63%.

The gross profit margin of 37.30% for LTD we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.50% trails the industry average.

LTD, with its decline in revenue, slightly underperformed the industry average of 9.5%. Since the same quarter one year prior, revenue fell by 12.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

Compared with where it was trading a year ago, LTD's share price has not changed very much because of relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Although this company's share value is no higher or lower since its value 12 months ago, it seems as though there could be potential for future growth.

LTD 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. 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, LTD has increased its bottom line by earning $1.93 vs. $1.67 in the prior year. For the next year, the market is expecting a contraction of 18.1% in earnings ($1.58 vs. $1.93).

LTD had been rated a hold since Aug. 22, 2007.

Dell ( DELL) has been downgraded from buy to hold. Dell and its subsidiaries engage in the design, development, manufacture, marketing, sale, and support of computer systems and services worldwide. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

DELL's revenue growth has slightly outpaced the industry average of 10.6%. Since the same quarter one year prior, revenue rose by 11.2%. 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 company's current return on equity greatly increased when compared with its return on equity from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared with other companies in the computers & peripherals industry and the overall market, DELL's return on equity significantly exceeds that of both the industry average and the S&P 500.

DELL's earnings per share declined by 6.1% 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, DELL increased its bottom line by earning $1.32 vs. $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.48 vs. $1.32).

Net operating cash flow has decreased to $1,108.00 million or 40.20% when compared with the same quarter last year. In addition, when comparing it to the industry average, the firm's growth rate is much lower.

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the computers and peripherals industry average but is greater than that of the S&P 500. The net income has decreased by 17.4% when compared with the same quarter one year ago, dropping from $746.00 million to $616.00 million.

DELL had been rated a buy since Aug. 4, 2008.

Exco Resources ( XCO) has been downgraded from buy to hold. Exco Resources, an independent oil and natural gas company, engages in the acquisition, development and exploitation of onshore oil and natural gas properties in North America. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally poor debt management.

Compared with its closing price of one year ago, XCO's share price has jumped by 32.02%, exceeding the performance of the broader market during that same time frame. Although XCO had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.

The gross profit margin for XCO is currently very high, coming in at 143.50%. It has increased significantly from the same period last year. Along with this, the net profit margin of 127.00% significantly outperformed against the industry average.

XCO, with its very weak revenue results, has greatly underperformed against the industry average of 30.2%. Since the same quarter one year prior, revenues plummeted by 160.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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 oil, gas & consumable fuels industry and the overall market, XCO's return on equity significantly trails that of both the industry average and the S&P 500.

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 oil, gas & consumable fuels industry. The net income has significantly decreased by 417.2% when compared with the same quarter one year ago, falling from $82.89 million to -$262.91 million.

XCO had been rated a buy since Aug. 12, 2008.

KBR ( KBR) has been downgraded from hold to sell. KBR operates as an engineering, construction, and services company supporting energy, petrochemicals, government services and civil infrastructure sectors worldwide. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and poor profit margins.

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 construction & engineering industry. The net income has significantly decreased by 65.7% when compared with the same quarter one year ago, falling from $140.00 million to $48.00 million.

Net operating cash flow has significantly decreased to -$352.00 million or 188.66% when compared with the same quarter last year. In addition, when comparing it with the industry average, the firm's growth rate is much lower.

Looking at the price performance of KBR's shares over the past 12 months, there is not much good news to report: the stock is down 47.47%, 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. 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.

The gross profit margin for KBR is currently extremely low, coming in at 5.60%. Regardless of KBR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.80% trails the industry average.

Current return on equity exceeded its return on equity from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the construction & engineering industry and the overall market, KBR's return on equity is significantly below that of the industry average and is below that of the S&P 500.

KBR had been rated a hold since March 24, 2008.

Acorda Therapeutics ( ACOR) has been downgraded from hold to sell. Acorda Therapeutics identifies, develops and commercializes novel therapies that improve neurological function in people with multiple sclerosis, spinal cord injury and other disorders of the central nervous system. The company's drug, Zanaflex Capsules, is FDA-approved for the management of spasticity. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share.

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 biotechnology industry. The net income has significantly decreased by 130.6% when compared with the same quarter one year ago, falling from -$8.16 million to -$18.82 million.

Current return on equity is lower than its return on equity from the same quarter one year prior. This is a clear sign of weakness within the company. Compared with other companies in the biotechnology industry and the overall market, ACOR's return on equity significantly trails that of both the industry average and the S&P 500.

Net operating cash flow has significantly decreased to -$8.42 million or 114.38% when compared with the same quarter last year. In addition, when comparing it with the industry average, the firm's growth rate is much lower.

ACOR 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. 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, ACOR has continued to lose money by earning -$1.43 vs. -$3.10 in the prior year. For the next year, the market is expecting a contraction of 47.5% in earnings (-$2.11 vs. -$1.43).

The gross profit margin for ACOR is currently very high, coming in at 82.60%. Regardless of ACOR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ACOR's net profit margin of -165.30% significantly underperformed when compared with the industry average.

ACOR had been rated a hold since May 6, 2008.

Additional ratings changes from September 11 are listed below.
Ticker Company Name Change New Rating Former Rating
ACOR Acorda Therapeutics Downgrade Sell Hold
ADAM ADAM Inc. Downgrade Hold Buy
AEPI AEP Industries Downgrade Sell Buy
ALG Alamo Group Downgrade Hold Buy
ARII American Railcar Industries Downgrade Sell Hold
CAS AM Castle & Co. Downgrade Hold Buy
DELL Dell Inc. Downgrade Hold Buy
ECGI Envoy Capital Group Downgrade Sell Hold
EURX Eurand N.V. Initiated Sell
EXXI Energy XXI Ltd. Initiated Sell
GAXC Global Axcess Corp. Upgrade Hold Sell
GENC Gencor Industries Downgrade Hold Buy
HKN HKN Inc. Downgrade Hold Buy
HOFT Hooker Furniture Corp Downgrade Hold Buy
JLWT Janel World Trade Downgrade Sell Hold
KBR KBR Inc. Downgrade Sell Hold
LTD Limited Brands Inc. Upgrade Buy Hold
MDNU Medical Nutrition USA Downgrade Sell Hold
MHJ Man Sang Holdings Downgrade Hold Buy
MKTAY Makita Corp Downgrade Hold Buy
PMFG PMFG inc. Downgrade Hold Buy
XCO Exco Resources Downgrade Hold Buy
This article was written by a staff member of TheStreet.com Ratings.

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