Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

The following ratings changes were generated on Monday, March 23.

We've upgraded mall-based specialty retailer Aeropostale ( ARO) from hold to buy, driven by the company's revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, increase in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Revenue rose by 16.7% since the same quarter one year prior and appears to have helped boost earnings per share, which improved by 6.3% compared with the year-ago quarter. We feel that the company's two-year trend of positive EPS growth should continue in the coming year. Aeropostale has a sturdy quick ratio or 1.3. Net income increased by 5.4%, from $64.7 million to $68.2 million, compared with the same quarter last year, exceeding the net income growth of both the S&P 500 and the specialty retail industry. The company's 35.3% gross profit margin is strong, though it has decreased from the same period last year. Its net profit margin of 9.9% compares favorably with the industry average.

We've downgraded Chiquita Brands International ( CQB), which distribute and markets bananas and fresh produce worldwide, from hold to sell. This rating is driven by the company's deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally weak debt management.

Net income fell to -$411.9 million in the most recent quarter from -$26 million in the same quarter last year, underperforming the S&P 500 and the food products industry. Return on equity also decreased, which can signal weakness within the corporation. Chiquita's 11.3% gross profit margin is low, having decreased from the year-ago quarter, and its net profit margin of -49.1% is below the industry average. Net operating cash flow decreased to -$51.8 million. The company's 1.7 debt-to-equity ratio is high overall and compared with the industry average, but its quick ratio is somewhat strong at 1.1, implying an ability to handle short-term liquidity needs.

We've downgraded Methode Electrnoics ( MEI), which manufactures component devices worldwide, from hold to sell. This rating is driven by the company's deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Net income decreased to -$27 million in the most recent quarter from $9.8 million in the year-ago quarter, underperforming the S&P 500 and the electronic equipment, instruments and components industry. ROE also decreased, which can signal weakness within the corporation. Methode's gross profit margin of 25.5% is lover than desirable, having decreased from the same quarter last year. Its net operating cash flow fell to $9 million compared with the year-ago quarter but still outperformed the industry average.

Shares tumbled 64.6% over the pas year, underperforming the S&P 500, and EPS are also down compared with the year-earlier quarter. 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 Tootsie Roll Industries ( TR), which manufactures and sells confectionery products, from buy to hold. Strengths include the company's revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, we also find weaknesses including a decline in the stock price during the past year, deteriorating net income and disappointing return on equity.

Revenue increased by 0.3% since the year-ago quarter, compared with the industry average of 1.6% growth, but EPS declined. The company' has a very low debt-to-equity ratio of 0.01, which is below the industry average, implying successful management of debt levels. Its quick ratio of 2 implies an ability to cover short-term liquidity needs. Tootsie Roll's 36.3% gross profit margin is strong, having increased from the same quarter last year, but its net profit margin of 4.6% trails the industry average. Net operating cash flow declined 9% to $63.5 million compared with the year-ago quarter.

Shares are down 11.3% over the past year, in part reflecting the market's overall decline, which was actually deeper. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last 12 months, and it could be down again in the next 12. Naturally, a bull or bear market could sway the movement of this stock.

We've upgraded Internet service provider Yahoo! ( YHOO) from sell to hold. Strengths include the company's largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Yahoo!'s essentially has no debt, and it maintains a 2.7 quick ratio, which implies an ability to cover short-term cash needs. Its 69.3% gross profit margin is high in spite of having decreased from the year-ago quarter. Its net profit margin of -16.8%, however, underperformed the industry average. Net operating cash flow fell 48.4% to $321 million compared with the year-ago quarter. ROE also decreased, implying a minor weakness in the corporation.

Other ratings changes included CommVault ( CVLT), downgraded from hold to sell, and Diamond Foods ( DMND), downgraded from buy to hold.

All ratings changes generated on March 23 are listed below.

Ticker
Company
Current
Change
Previous
ARO
Aeropostale
BUY
Upgrade
HOLD
ATNI
Atlantic Tele-Network
HOLD
Downgrade
BUY
AZO
AutoZone
HOLD
Downgrade
BUY
CQB
Chiquita Brands
SELL
Downgrade
HOLD
CVLT
CommVault
SELL
Downgrade
HOLD
DMND
Diamond Foods
HOLD
Downgrade
BUY
ESP
Espey Manufacturing & Electronics
HOLD
Downgrade
BUY
FBSI
First Bancshares
SELL
Downgrade
HOLD
FTK
Flotek Industries
SELL
Downgrade
HOLD
MDVN
Medivation
SELL
Initiated
MEI
Methode Electronics
SELL
Downgrade
HOLD
TATTF
TAT Technologies
HOLD
Downgrade
BUY
TR
Tootsie Roll Industries
HOLD
Downgrade
BUY
YHOO
Yahoo!
HOLD
Upgrade
SELL

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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