The following ratings changes were generated on Friday, March 6.

We've downgraded natural gas company El Paso ( EP) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Net income decreased to -$1.7 billion from $160 million in the same quarter last year, significantly underperforming the S&P 500 and the oil, gas and consumable fuels industry. El Paso's debt-to-equity ratio of 3.5 is very high and currently above the industry average, implying very poor management of debt levels within the company. Its 0.6 quick ratio demonstrates the company's lack of ability to cover short-term liquidity needs. Return on equity has greatly decreased compared with the year-ago quarter, a signal of major weakness. Net operating cash flow decline marginally, by 7% to $319 million.

Shares have tumbled 65.7% over the year, underperforming the S&P 500, and EPS are down 1,257.1%. The stock's decline 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 Heinz ( HNZ) from buy to hold. Strengths include its growth in earnings per share, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we find that the company has not been very careful in the management of its balance sheet.

EPS improved by 11.8% in the most recent quarter compared with the year-ago quarter, and we feel that the company's two-year trend of positive EPS growth should continue, suggesting improving business performance. ROE increased from the year-ago quarter, a signal of significant strength. Net operating cash flow increased by 14.9% to $292.4 million, though at a significantly lower rate than the 116.8% industry average. Heinz's debt-to-equity ratio of 4.3 is very high and currently above the industry average, suggesting very poor management of debt levels, and its 0.6 quick ratio demonstrates its lack of ability to cover short-term liquidity needs.

Shares are off by 29.2% on the year, though the broader market plunge during the same time frame was worse. 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 pharmaceutical company Eli Lilly ( LLY) from hold to sell, driven by its deteriorating net income, generally weak debt management, disappointing return on equity, decline in the stock price during the past year and feeble growth in its earnings per share.

Net income feel to -3.6 billion from $854 million in the same quarter last year, significantly underperforming the S&P 500 and the pharmaceuticals industry. The company's 1.6 debt-to-equity ratio is quite high overall and compared with the industry average, and its 0.7 quick ratio illustrates an inability to avoid short-term cash problems. ROE has greatly decreased compared with the year-ago quarter, a signal of major weakness within the corporation. EPS declined by 524.4% in the most recent quarter compared with the year-ago quarter, though the consensus estimate suggests that the company's two-year trend of declining EPS should reverse in the coming year.

Shares are down 45.5% on the year, in part reflecting the overall decline in the broader market. 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 Procter & Gamble ( PG) from buy to hold. Strengths include its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, we also find weaknesses including a decline in the stock price during the past year and weak operating cash flow.

Net income increased by 53% compared with the year-ago quarter, from $3.3 billion to $5 billion, significantly outperforming the S&P 500 and the household products industry. EPS for the most recent quarter were slightly below those of the year-earlier quarter, but we feel the company is poised for EPS growth in the coming year. Procter's debt-to-equity ratio of 0.7 is somewhat low and below the industry average, implying relatively successful debt-level management. Its quick ratio of 0.3, however, is weak and demonstrates a lack of ability to pay short-term obligations. Net operating cash flow decreased 42.3% to $2.4 billion compared with the year-ago quarter.

Shares have tumbled 31.9% over the past year, in part due to the decline in the broader market, which was actually sharper. Do not assume, however, that the stock can now be tagged as cheap and attractive. Based on its current price in relation to its earnings, Procter is still more expensive than most of the other companies in its industry.

We've downgraded AT&T ( T) from buy to hold. Strengths include its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, we also find weaknesses including a decline in the stock price during the past year and feeble growth in the company's earnings per share.

Revenue increased by 2.4% since the same quarter a year ago, slightly outpacing the industry average of 1.1%, but EPS declined. Net operating cash flow increased 10.5% to 10.9 billion, outperforming the industry average. AT&T's debt-to-equity ratio of 0.8 is somewhat low and below the industry average, implying relatively successful management of debt levels. Its quick ratio of 0.4, however, is very weak and demonstrates a lack of ability to pay short-term obligations. EPS declined by 19.6% in the most recent quarter compared with the same quarter last year, and we feel it is likely to report a decline in the coming year. Shares plunged 36.4% over the past year, in part due to the broader market's decline, which was even sharper. 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.

Other ratings changes included Ciena ( CIEN), downgraded from hold to sell, and Waste Management ( WMI), downgraded from buy to hold.

All ratings changes generated on March 6 are listed below.

 
Ticker
Company
Current
Change
Previous
CBU Community Bank System
HOLD
Downgrade
BUY
CCRN Cross Country Healthcare
SELL
Downgrade
HOLD
CIEN Ciena
SELL
Downgrade
HOLD
CNP CenterPoint Energy
HOLD
Downgrade
BUY
EP El Paso
SELL
Downgrade
HOLD
ETR Entergy
HOLD
Downgrade
BUY
FCFS First Cash Financial
HOLD
Downgrade
BUY
GA Giant Interactive Group
SELL
Initiated
HCN Health Care REIT
HOLD
Downgrade
BUY
HNZ Heinz
HOLD
Downgrade
BUY
HRLY Herley Industries
SELL
Downgrade
HOLD
JCS Communications Systems
HOLD
Downgrade
BUY
LLY Eli Lilly
SELL
Downgrade
HOLD
MMSI Merit Medical Systems
HOLD
Downgrade
BUY
NTIC Northern Technologies
SELL
Downgrade
HOLD
PG Procter & Gamble
HOLD
Downgrade
BUY
SENEA Seneca Foods
BUY
Upgrade
HOLD
SENEB Seneca Foods
BUY
Upgrade
HOLD
T AT&T
HOLD
Downgrade
BUY
VALU Value Line
HOLD
Downgrade
BUY
WMI Waste Management
HOLD
Downgrade
BUY
WPCS WPCS International
SELL
Downgrade
HOLD
WPP Wausau Paper
SELL
Downgrade
HOLD
WR Westar Energy
HOLD
Downgrade
BUY
ZIGO Zygo
SELL
Downgrade
HOLD

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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