Each business day, TheStreet.com Ratings TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight.These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate. Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans. Amazon.com ( AMZN) is an online retailer that operates various retail websites, including amazon.com, shopbop.com and endless.com. We upgraded this stock to a buy in February 2009 because of the company's impressive top-line growth across geographies, higher earnings and healthy cash balances. For the fourth quarter of fiscal 2008, Amazon's revenue increased 18.2% year over year, boosted by higher sales from the North American and international segments. Net income also improved, rising 8.7% from $207 million to $225 million. Earnings per share rose in turn, climbing from 48 cents to 52 cents per share. Cash and cash equivalents jumped 19.8%, while total debt for the quarter dropped 52.1%. Stockholder equity more than doubled to $2.7 billion. As a result, the debt-to-equity ratio improved to 0.3 from 1.2 in the prior year's quarter.
Looking ahead to the first quarter of fiscal 2009, Amazon expects sales in the range of $4.5 billion to $4.9 billion. This would represent an increase of 9% to 19% over the same quarter of fiscal 2008. Be aware, however, that factors like contracting margins and shrinking return on equity could negatively impact the stock's future performance. FPL Group ( FPL) through its subsidiaries, engages in the generation, transmission, distribution and sale of electric energy. It produces electricity through natural gas, wind, nuclear, oil, hydro and other resources. We have rated the stock a buy since Jan. 8 due to the company's impressive growth and strong fundamentals. The company's strengths can be seen in multiple areas, such as its growth in revenue and net income, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated. Fourth quarter net income increased by 81.7% compared with the same quarter one year prior, rising from $224 million to $407 million and exceeding the S&P 500 and the electric utilities industry. Net operating cash flow increased to $1 billion, or 23.3% compared with the same quarter last year. The company has demonstrated a pattern of positive EPS growth over the past two years, but we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, FPL increased its bottom line by earning $4.07 vs. $3.28 in the prior year. For the next year, the market is expecting a contraction of 0.5% in earnings to $4.05.
Although the company has poor debt management and subpar liquidity, as reflected by its .3 quick ratio, we feel that the strengths outlined above outweigh any weaknesses. Gilead Sciences ( GILD) is a biopharmaceutical company that discovers, develops and commercializes therapeutics to advance the care of patients suffering from life-threatening diseases worldwide. We upgraded Gilead to a buy in October 2008. For the third quarter of fiscal 2008, revenue increased 29.5% to $1.4 billion from $1.1 billion a year ago due to higher product sales. Product sales surged 39.1% to $1.3 billion from $961.9 million, driven by strong growth of antiviral product sales (these in turn make up the most significant portion of overall revenue for the company). Royalty revenue plunged 72.4% to $25.2 million from $91 million, hurt by decreased Tamiflu royalties from Roche. Contract and other revenue spiked 29.6% to $7.6 million from $5.9 million a year ago. Margins were squeezed, however, as cost growth outpaced that of revenue. EPS rose from 42 cents in the third quarter of fiscal 2007 to reach 52 cents in the most recent period, an increase of 23.8%. During the quarter under review, the Food and Drug Administration granted marketing approval to Viread for the treatment of chronic hepatitis B. The FDA refused to approve the inhaled version of aztreonam lysine and asked the company to conduct another study. Gilead also announced it intends to repurchase $750.00 million of its shares on an accelerated basis under a $3.00 billion share repurchase program announced in October 2007. Recently, Teva Pharmaceuticals ( TEVA) applied to the FDA for permission to make a generic version of Gilead's HIV drug, Truvada. Gilead responded with a patent infringement lawsuit that can halt generic entry for a period of up to 30 months. Investors should be aware that this and other patent-related threats can pose a significant operational risk to the company's prospects, and are always situations that require monitoring. Other risks include any other regulatory or legal affairs, as well as any government policies that are considered unfavorable to drug makers.'
Wal-Mart Stores ( WMT) operates retail stores worldwide. The company began with a single discount store in 1962 and now operates approximately 7,390 Wal-Mart and Sam's Club stores in 14 markets. Our buy rating for Wal-Mart has been in place since February 2008. This rating is based on a variety of strengths, including the company's attractive valuation levels, good cash flow from operations, revenue growth, and solid stock price performance. For the fourth quarter of fiscal 2008, the company reported that its revenue increased slightly, rising 1.6% year over year. Although diluted EPS came in higher than the company's most recent guidance, an overall decline in EPS indicates that the revenue increase did not trickle down to the bottom line. However, return on equity improved slightly when compared to the same quarter one year ago, and net operating cash flow increased 18.7%. Although Wal-Mart's stock price has not changed much over the past year, we feel that the stock has good upside potential at this time. Management announced that the company's $108 billion in fourth-quarter sales was its strongest sales result ever, and stated that the company remains well-positioned for the future due to its pricing. Although Wal-Mart shows low profit margins, we believe that the strengths detailed above outweigh any potential weaknesses at this time. Apollo Group ( APOL) is a global educational services company that operates through its subsidiaries, including the University of Phoenix, the Institute for Professional Development Western International University. It also owns Aptimus, a provider of innovative digital media solutions. We upgraded our rating on Apollo to a buy in July 2008 based on some notable strengths, such as its robust revenue growth, solid stock price performance, impressive record of EPS growth, expanding profit margins and good cash flow from operations.
For the first quarter of fiscal 2009, the company reported that its revenue rose by 24.4% year over year, slightly outpacing the industry average of 18.8% growth. This growth appears to have helped boost Apollo's earnings per share, which improved 34.9% in the most recent quarter when compared to the first quarter of fiscal 2008. We feel that the trend of positive EPS growth over the past two years should continue. Net operating cash flow increased by 83.2% in the first quarter, rising to $380.8 million. Management stated that Apollo benefitted in the first quarter from investments made over the past several years. The company believes that the current economy is most likely having a positive effect on its business, as evidenced by year-end 2008 momentum carrying into fiscal 2009. With a strong balance sheet and strong operational and academic teams in place, management is optimistic about Apollo's outlook going forward. While we find the company's return on equity somewhat disappointing, we believe the strengths detailed above outweigh any potential weakness at this time. Our quantitative rating, which can be viewed for any stock through our stock screener stock rating screener, is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks. 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 should be part of an investor's overall research.