TSC Ratings' Updates: Precision Castparts

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Tuesday, May 19.

We've upgraded CNX Gas ( CXG) from hold to buy, driven by its robust revenue growth, increase in net income, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenues rose by 16.9% since the same quarter one year prior, and EPS improved. CNX's gross profit margin is 74.4%, having increased from the same quarter last year. Net profit margin of 30.9% outperformed the industry average. Net operating cash flow increased by 65.9% to $126.4 million compared with the year-ago quarter, and net income increased 10%, from $49.9 million to $54.9 million. CNX has a debt-to-equity ratio of 0.1, which is above the industry average, and a quick ratio of 0.2.

We've upgraded Coca-Cola Femsa ( KOF) from hold to buy, driven by its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue fell 2.4% since the year-ago quarter, and EPS decreased by 38.5% in the most recent quarter compared to the year-ago one. The company has suffered a declining pattern of earnings per share over the past two years, but we anticipate this trend to reverse over the coming year. The company's 49.5% gross profit margin has decreased from the year-ago quarter. Its 5.9% net profit margin is also lower. The 0.4 debt-to-equity ratio is above the industry average, and the quick ratio is 0.6. Return on equity is lower than it was in the year-ago quarter.

We've upgraded Precision Castparts ( PCP) from hold to buy, driven by its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Precision Castparts reported flat earnings per share in the most recent quarter and has reported somewhat volatile earnings recently, but we feel it is poised for EPS growth in the coming year. Revenue dropped by 9.2% since the year-ago quarter. The 31.1% gross profit margin has managed to increased from the same quarter last year. The 16.2% net profit margin outperformed the industry average. Net income decreased by 6.7% compared with the year-ago quarter, dropping from $279 million to $260.3 million. ROE also decreased.

We've upgraded Ruddick ( RDK) from hold to buy, driven by its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue increased by 3.5% since the same quarter a year ago, though EPS declined slightly. The company has reported somewhat volatile earnings recently, and we feel it is likely to report a decline in earnings in the coming year. Net operating cash flow rose 9.7% to $94.3 million. The 0.4 debt-to-equity ratio is below the industry average, but the quick ratio is 0.3. Net income fell 4.7% compared with the year-ago quarter, from $24.1 million to $22. 9 million.

We've upgraded Valspar ( VAL) from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

The 0.7 debt-to-equity ratio is below the industry average. The company has a quick ratio of 0.7. Revenue fell 20.1% since the year-ago quarter, and EPS decreased by 26.3%. The company has suffered a declining pattern of earnings per share over the past two years, but we anticipate this trend to reverse over the coming year. Net income fell 26.7% compared with the same quarter last year, from $37.9 million to $27.8 million.

The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Other ratings changes include El Paso ( EP), upgraded from sell to hold, and American Superconductor ( AMSC), also upgraded from sell to hold.

All ratings changes from May 19 are listed below.

Ticker
Company
Current
Change
Previous
AMSC
American Superconductor
HOLD
Upgrade
SELL
BNHN
Benihana
HOLD
Upgrade
SELL
CRWE
Crown Equity Holdings
SELL
Initiated
CXG
CNX Gas
BUY
Upgrade
HOLD
DJCO
Daily Journal
BUY
Upgrade
HOLD
E
Eni
BUY
Upgrade
HOLD
EGN
Energen
BUY
Upgrade
HOLD
EP
El Paso
HOLD
Upgrade
SELL
FUQI
Fuqi International
HOLD
Upgrade
SELL
GIB
CGI Group
BUY
Upgrade
HOLD
HBE
Henry Bros. Electronics
BUY
Upgrade
HOLD
HGIC
Harleysville Group
HOLD
Downgrade
BUY
ICA
Empresas ICA
HOLD
Upgrade
SELL
KOF
Coca-Cola Femsa
BUY
Upgrade
HOLD
MITSY
Mitsui
HOLD
Upgrade
SELL
MTD
Mettler-Toldedo International
BUY
Upgrade
HOLD
OMC
Omnicom Group
BUY
Upgrade
HOLD
OPTI
Opti
SELL
Downgrade
HOLD
PBIP
Prudential Bancorp
HOLD
Upgrade
SELL
PBOF
Pure Biofuels
SELL
Initiated
PCBC
Pacific Capital Bancorp
SELL
Downgrade
HOLD
PCP
Precision Castparts
BUY
Upgrade
HOLD
PNSN
Penson Worldwide
HOLD
Upgrade
SELL
RBC
Regal-Beloit
BUY
Upgrade
HOLD
RDK
Ruddick
BUY
Upgrade
HOLD
RURL
Rural/Metro
HOLD
Upgrade
SELL
SCLN
Sciclone Pharmaceuticals
HOLD
Upgrade
SELL
STRM
Streamline Health Solutions
HOLD
Upgrade
SELL
SYNM
Syntroleum
HOLD
Upgrade
SELL
TECH
Techne
BUY
Upgrade
HOLD
TPUT
Barzel Industries
SELL
Initiated
VAL
Valspar
BUY
Upgrade
HOLD
XFN
Xfone
HOLD
Upgrade
SELL

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.

TheStreet.com Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research, click here now!

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