The Hain Celestial Group ( HAIN) has been upgraded from hold to buy. The Hain Celestial Group, together with its subsidiaries, manufactures, markets, distributes, and sells natural and organic food and personal care products. The company's strengths can be seen in multiple areas, such as its robust revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. HAIN's revenue growth trails the industry average of 35.6%. Since the same quarter one year prior, revenue rose by 25.2%. 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 current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems. HAIN's earnings per share declined by 44.8% in the most-recent quarter compared with the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, HAIN reported lower earnings of 99 cents vs. $1.16 in the prior year. This year, the market expects an improvement in earnings ($1.58 vs. 99 cents). 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 food products industry. The net income has significantly decreased by 46.4% when compared with the same quarter one year ago, falling from $12.14 million to $6.50 million.
HAIN's share price is down 10.38% over the past year. We believe this reflects several factors -- the market's overall decline (which was actually deeper), the sharp decline in the company's earnings per share and other weaknesses. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative. HAIN had been rated a hold since June 27, 2008. F.N.B. ( FNB) has been upgraded from hold to buy. F.N.B., through its subsidiaries, provides various financial services to consumers and small to medium-sized businesses in Pennsylvania, Ohio, Florida, and Tennessee. It operates in four segments: community banking, wealth management, insurance, and consumer finance. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. FNB's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenue rose by 18.5%. 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 gross profit margin for F.N.B. is rather high; currently it is at 61.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.90% is above that of the industry average.
Net operating cash flow has significantly increased by 921.95% to $197.73 million when compared with the same quarter last year. In addition, F.N.B. has also vastly surpassed the industry average cash flow growth rate of 310.22%. The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the commercial banks industry average. The net income has decreased by 17.7% when compared with the same quarter one year ago, dropping from $17.62 million to $14.51 million. FNB's earnings per share declined by 41.4% 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, F.N.B. increased its bottom line by earning $1.15 vs. $1.13 in the prior year. For the next year, the market is expecting a contraction of 13.0% in earnings ($1.00 vs. $1.15). FNB had been rated a hold since June 26, 2008. Rowan Companies ( RDC) has been downgraded from buy to hold. Rowan Companies, provides a range of onshore and offshore contract drilling services in the U.S. and internationally. The company reported a steady financial performance in the recently concluded quarter and expects to maintain a similar performance in the future on the back of favorable industry outlook. In addition, the company offers superior shareholder returns. The company's revenue increased 5.0% to $485.49 million in first quarter fiscal year 2008, as compared with first quarter fiscal year 2007, primarily due to an increase in day rates (price paid by a producer for using the drilling rig on a daily basis) following an increase in capital expenditure by oil and gas companies worldwide. RDC's net income increased by a higher rate of 14.2% to $98.63 million mainly due to margin expansion.
The company registered a significant improvement in its return-on-equity (ROE) in the past three years due to strong earnings growth. The company's ROE increased to 20.22% from 17.65% as of the end of first quarter fiscal year 2007. Though ROE slightly less than the industry average, it was significantly higher than the S&P 500 average. In addition, the company has a track record of paying regular cash dividend and declared 10 cents per share. RDC provides a range of onshore and offshore contract drilling services to the oil and gas industry in the U.S and internationally. Crude oil and natural gas prices are significantly above their historical averages and currently trading at an all time high level and are expected to remain at higher level due to the tight world oil demand-supply situation. This situation encourages oil exploration and production companies increase their efforts to produce oil. RDC is expected to benefit from this in the near future. The company's performance is dependent on the number of rigs operational in the market. The slowdown in the U.S economy and weakness in the US labor market may put pressure on the demand for oil and gas. The lower demand for oil products could disturb explorations and production related activities. This could affect the number of rigs that are operational in the market, which could ultimately affect the profitability of the company. RDC had been rated a buy since September 29, 2006. Omnicon Group ( OMC) has been downgraded from buy to hold. Omnicom Group, provides advertising, marketing, and corporate communications services. It offers services in traditional media advertising, customer relationship management, public relations and specialty communications groups. Our rating is based on the company's double-digit revenue and net income growth; these positives are further strengthened by notable return on equity and on assets, and its strategic acquisitions to expand its business operations. However, a highly competitive market and declining margins pose as a downside risk to our rating.
Omnicom Group's fourth quarter fiscal year 2007 revenue increased 12.7% year over year to $3.63 billion from $3.22 billion a year ago. The reported growth was fueled by double-digit revenue growth from domestic and international markets. Geographically, international revenue spiked 16.3% to $1.78 billion, driven by a strong performance in the emerging markets of Asia, Middle East, Latin America, Eastern Europe, as well as the North American markets. In the fourth quarter fiscal year 2007, net income surged 13.2% to $313.80 million from $277.20 million a year earlier, and EPS climbed 18.5% to 96 cents per share from 81 cents, due to a lower number of outstanding shares. Notable return on equity and assets. Cash flow from operating activities increased 5.9% to $1.43 billion from the year-ago balance. Furthermore, return on equity advanced 153 basis points to 23.85% from 22.32%, while return on assets expanded 30 basis points to 5.06% from 4.76% in the prior-year quarter. Omnicom acquired a minority stake in a Chinese communications company, Shunya Communications Group, in January. Furthermore, with the aim of improving and expanding its digital marketing capabilities, Omnicom has acquired a majority interest in Shift, a digital consultancy firm in New Zealand. Omnicom has also acquired Kern Organization, a direct marketing agency. The company's failure to retain its key clients and attract new clients as well as tough competition in the advertising business may pose challenges for the company. Moreover, declining margins and a somewhat poor liquidity ratio may adversely impact the company's future performance. OMC had been rated a buy since September 29, 2006.
British Sky Broadcasting Group ( BSY) has been downgraded from hold to sell. British Sky Broadcasting Group and its subsidiaries provide pay television broadcast services to retail and wholesale customers in the United Kingdom and Ireland. The company also offers broadband and telephony services. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, poor profit margins, generally disappointing historical performance in the stock itself 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 media industry. The net income has significantly decreased by 107.8% when compared with the same quarter one year ago, falling from $237.37 million to -$18.52 million. The gross profit margin for BSY is rather low; currently it is at 23.80%. Regardless of BSY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, BSY's net profit margin of -0.70% significantly underperformed when compared with 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 47.56%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 107.54% compared with 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.
BSY 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 reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BSY's GRP swung to a loss, reporting -58 cents vs. $2.27 in the prior year. This year, the market expects an improvement in earnings ($2.25 vs. -58 cents). Despite the fact that BSY's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.54 is low and demonstrates weak liquidity. BSY had been rated a hold since February 28, 2008. The remaining ratings generated on October 2, 2008 are listed blow.
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.
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|HAIN||Hain Celestial Group||BUY||Upgrade||HOLD|
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