The following ratings changes were generated on Friday, Feb. 27.

We've downgraded Dell ( DELL) from hold to sell, driven by its deteriorating net income, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Net income fell by 48.3% since the year-ago quarter, from $679 million to $351 million, underperforming the S&P 500 and the computers and peripherals industry. Dell's 18.7% gross profit margin is rather low, having decreased from the same quarter last year, and its net profit margin of 2.6% significantly trails the industry average. Net operating cash flow feel by 39.1% to $729 million compared with the year-ago quarter. Earnings per share declined by 41.9%, though the consensus estimate suggests that the company's yearlong trend of declining EPS should reverse in the coming year.

Shares have tumbled by 59.9%, underperforming the S&P 500, over the past year. Naturally, the overall market trend is bound to be a significant factor, and 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.

We've downgraded King Pharmaceuticals ( KG), which provides branded prescription pharmaceutical products worldwide, from hold to sell, driven by its deteriorating net income, disappointing return on equity, decline in the stock price during the past year and feeble growth in its earnings per share.

Net income decreased to -$548.5 million from $42.8 million since the same quarter last year, significantly underperforming the S&P 500 and the pharmaceuticals industry. Return on equity also greatly decreased, a signal of major weakness within the corporation. EPS declined by 1,350% compared with the year-earlier quarter, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year. Revenue fell by 34.8% compared with the year-ago quarter.

Shares are down 26.6% over the year, though the performance of the broader market has been even worse. 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.

We've downgraded Plains Exploration & Production ( PXP), which engages in the acquisition, development, exploration, and production of oil and gas properties, from hold to sell. This rating is driven by the company's deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Since the year-ago quarter, net income fell from 80 million to -$1.6 billion, significantly underperforming the S&P 500 and the oil, gas and consumable fuels industry. The company has a 1.2 debt-to-equity ratio, which is high relative to the industry average, suggesting a need for better debt-level management. It maintains a quick ratio of 0.5, clearly demonstrating its inability to cover short-term cash needs. ROE has greatly decreased since the same quarter last year, a signal of major weakness, and net operating cash flow fell by 25.8% to $224.5 million.

Shares are down 62.4% on the year, underperforming the S&P 500, and EPS are down 1,897.5%. The stock's decline 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.

We've downgraded biopharmaceutical company ViroPharma ( VPHM) from hold to sell, driven by its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and disappointing return on equity.

EPS declined 104% compared with the year-ago quarter, and we anticipate that the company's two-year pattern of declining EPS should continue in the coming year. Net income decreased to -$980,000 in the most recent quarter from $20.4 million in the year-ago quarter, significantly underperforming the S&P 500 and the pharmaceuticals industry. Net operating cash flow fell 98.2% to $570,000, and ROE also decreased, a clear sign of weakness.

Shares are down 49.7% on the year, in part reflecting the market's overall decline. 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.

We've downgraded W&T Offshore ( WTI), which engages in the acquisition, exploitation, exploration, production and development of oil and natural gas properties, from hold to sell. This rating is driven by the company's deteriorating net income, disappointing return on equity, weak operating cash flow, generally weak debt management and generally disappointing historical performance in the stock itself.

Net income fell from $49.4 million in the year-ago quarter to -$851.4 million in the most recent quarter, significantly underperforming the S&P 500 and the oil, gas and consumable fuels industry. ROE also greatly decreased, a signal of major weakness. Net operating cash flow fell to -$157.8 million, underperforming the industry average. W&T's 1.1 debt-to-equity ratio is high relative to the industry average, suggesting a need for better debt-level management, but its quick ratio is somewhat strong at 1.5, demonstrating its ability to handle short-term liquidity needs.

Shares fell 74.7% over the past year, underperforming the S&P 500, and EPS fell 1,824.6%. The stock's decline 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.

Other ratings changes included Checkpoint Systems ( CKP)and First Financial Northwest ( FFNW), both downgraded from hold to sell.

All ratings changes generated on Feb. 27 are listed below.

Ticker
Company
Current
Change
Previous
ACET
Aceto
HOLD
Downgrade
BUY
ANSS
Ansys
HOLD
Downgrade
BUY
ARBA
Ariba
HOLD
Upgrade
SELL
CKP
Checkpoint Systems
SELL
Downgrade
HOLD
DELL
Dell
SELL
Downgrade
HOLD
EME
Emcor Group
HOLD
Downgrade
BUY
FFNW
First Financial Northwest
SELL
Downgrade
HOLD
FGXI
FGX International Holdings
SELL
Downgrade
HOLD
HK
Petrohawk Energy
HOLD
Downgrade
BUY
IPCR
IPC Holdings
HOLD
Downgrade
BUY
KG
King Pharmaceuticals
SELL
Downgrade
HOLD
MATK
Martex BioSciences
HOLD
Downgrade
BUY
NVS
Novartis
HOLD
Downgrade
BUY
PCTI
PCTel
SELL
Downgrade
HOLD
PXP
Plains Exploration
SELL
Downgrade
HOLD
VPHM
ViroPharma
SELL
Downgrade
HOLD
WGOV
Woodward Governor
HOLD
Downgrade
BUY
WTI
W&T OffShore
SELL
Downgrade
HOLD

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