TSC Ratings' Updates: Enzon Pharma

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 Wednesday, May 20.

We've upgraded Enzon Pharmaceuticals ( ENZN) from sell to hold. Strengths include the company's increase in net income and expanding profit margins. However, we also find weaknesses including a decline in the stock price during the past year, generally poor debt management and disappointing return on equity.

Net income rose 307.6% compared with the same quarter last year, from $1.5 million to $6.2 million. Enzon's gross profit margin of 77.2% has increased from the year-ago quarter, but its 12.7% net profit margin trails the industry average. Revenue fell 0.3% since the year-ago quarter, though EPS increased. The debt-to-equity ratio or 5 is above the industry average, but the quick ratio of 4.6 implies an ability to cover short-term cash needs. Return on equity has decreased compared with the same quarter last year.

We've upgraded Fluor ( FLR) from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, compelling growth in net income and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue rose by 20.6% since the same quarter last year, and EPS are up, though we anticipate underperformance in the coming year relative to the company's two-year pattern of positive EPS growth. Fluor's debt-to-equity ratio of 0.1 is below the industry average, and its quick ratio of 1.1 implies an ability to avoid short-term cash problems. ROE has improved compared with the same quarter last year, and net income increased by 49.8%, from $136.7 million to $204.8 million.

We've upgraded Home Depot ( HD) from hold to buy, driven by its increase in net income, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Net income increased by 44.4% compared with the same quarter last year, from $356 million to $514 million, but revenue fell by 10.9%. EPS rose by 42.9% in the most recent quarter compared with the year-ago one, though we feel the company is likely to report an earnings decline in the coming year. ROE is below that it was in the year-ago quarter.

We've upgraded Honda Motor ( HMC) from hold to buy, driven by its robust revenue growth, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

Revenue rose by 28.2% since the same quarter last year, though EPS declined. We feel the company is likely to report a decline in earnings in the coming year. Net income fell 62.9%, from $1.9 billion to $700.1 million. ROE is below what it was in the year-ago quarter.

We've upgraded United Technologies ( UTX) from hold to buy, driven by its notable return on equity and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

ROE increased from the same quarter a year ago, though revenue fell by 12.2%. EPS also declined, by 24.3% in the most recent quarter compared with the year-ago quarter. We feel that United Technologies is likely to report a decline in earnings in the coming year. Net income fell 27.8% compared with the year-ago quarter, from $1 billion to $722 million.

All ratings changes from May 20 are listed below.

Ticker
Company
Current
Change
Previous
CTBC
Connecticut Bank & Trust
HOLD
Upgrade
SELL
CYBS
CyberSource
HOLD
Downgrade
BUY
DGLY
Digital Ally
SELL
Downgrade
HOLD
DMLP
Dorchester Minerals
BUY
Upgrade
HOLD
DSEN
Datascension
SELL
Initiated
ENZN
Enzon Pharmaceuticals
HOLD
Upgrade
SELL
FLR
Fluor
BUY
Upgrade
HOLD
HD
Home Depot
BUY
Upgrade
HOLD
HMC
Honda Motor
BUY
Upgrade
HOLD
ITLN
Intellon
HOLD
Upgrade
SELL
LWAY
Lifeway Foods
BUY
Upgrade
HOLD
MSTR
MicroStrategy
HOLD
Upgrade
SELL
NUTR
Nutraceutical
SELL
Downgrade
HOLD
PEG
Public Service Enterprise Group
BUY
Upgrade
HOLD
ROG
Rogers
SELL
Downgrade
HOLD
SCSC
ScanSource
BUY
Upgrade
HOLD
TUC
Mac-Gray
HOLD
Upgrade
SELL
UTX
United Technologies
BUY
Upgrade
HOLD
WLFC
Willis Lease Financial
BUY
Upgrade
HOLD
Y
Alleghany
HOLD
Downgrade
BUY

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.

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