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) owns and operates Florida Power & Light Company, supplying electric service to a population of more than eight million throughout most of the east and lower west coasts of Florida. We have rated the stock a buy since January 2009 due to the company's impressive growth and strong fundamentals. For the fourth quarter of fiscal 2008, FPL's revenue grew 8.7% year over year to $4 billion due to higher energy prices, which increased from 10.74 cents per kilowatt hour (kWh) to 11.55 cents per kWh. The revenue growth slightly outpaced the industry average of 1.5%, and appears to have helped boost EPS. Continuing a trend of positive EPS growth over the past two years, the company reported significant EPS improvement in the fourth quarter, aided by flat operating expenses and higher revenue. However, we anticipate underperformance relative to this pattern in the coming year. Net income increased by 81.7% when compared to the same quarter a year ago, rising from $224 million to $407 million. Net operating cash flow also increased during the quarter, growing 23.25% year over year. Higher margins were also a strength for FPL in the most recent quarter, as gross profit margin widened to 27.6% from 21% and operating margin expanded 725 basis points to 18.8%. One further strength for the organization was a slight improvement in return on equity, which increased from 12.2% to 14%.
Looking to the future, FPL Group recently received approval for several expansion projects. The group plans to add 7,000 to 9,000 megawatts of wind assets to its portfolio between fiscal 2008 and fiscal 2009. Bear in mind that rising debt, inadequate liquidity, and lower energy unit sales do put our current rating at risk, although we do feel that the strengths detailed above outweigh any potential weakness at this time. 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 million of its shares on an accelerated basis under a $3 billion share repurchase program announced in October 2007. Recently, Teva Pharmaceuticals ( TEVA) applied to the US 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.
The DIRECTV Group ( DTV) provides digital television entertainment in the United States and Latin America. We have rated the company a buy since May 2006 due to the company's impressive revenue growth, expanding profit margins, increased cash balance, and notable return on equity. For the fourth quarter of fiscal 2008, DirecTV's revenue increased 9% year over year, led by solid subscriber growth and continued ARPU growth in the United States. The company's EPS got a slight boost as a result, rising from 30 cents to 31 cents, despite a drop in net income. Gross profit margin also improved due to the company's revenue growth, expanding 57 basis points to 46.8%. Cash and cash equivalents jumped 82.6% to $2.01 billion, while net operating cash flow increased 8.8%. Return on equity also showed improvement, increasing 847 basis points to 31.2% due to a lower equity base. Management was pleased with the fourth quarter and full year results, noting that the company achieved its best quarterly net subscriber growth in over three years in the U.S. segment. While the company remains focused on obtaining new subscribers, it faces challenges from lower earnings, decreasing return on assets, and rising debt levels, which could affect financial performance and our rating in the future. Biogen Idec ( BIIB) is a biotechnology company that develops, manufactures, and commercializes novel therapeutics for use in the areas of oncology, neurology, immunology, and cardiology. It has been rated a buy since January 2009, when it was upgraded from a hold rating. The current rating is based on such strengths as the company's growth, total return, and efficiency.
For the fourth quarter of fiscal 2008, Biogen Idec reported revenue growth of 19.6% year-over-year, slightly outpacing the industry average of 19.3%. This growth contributed to an improvement in the company's EPS, which increased from 67 cents to 70 cents. Net income also experienced slight growth in the fourth quarter, rising from $201.5 million to $206.7 million, while net operating cash flow increased 18.3% to $409.3 million. In addition, a very low debt-to-equity ratio of 0.2 implies that Biogen Idec has successfully managed its debt levels, while a quick ratio of 2.2 indicates that the company is able to cover its short-term liquidity needs. Looking ahead, the company set various financial goals for fiscal 2010 based on its fiscal 2008 performance, including revenue growth in high single digits and operating expenses between $2 billion and $2.1 billion. Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from the generally positive outlook. 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.