Ratings Changes: Cooper Industries, Willis

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.

TheStreet.com Ratings downgraded Cooper Industries ( CBE) to "hold." The company makes electrical products and tools internationally.

The numbers: Fiscal first-quarter revenue fell 19% to $1.3 billion as net income dropped 35% to $100 million and earnings per share declined 44% to 48 cents. Operating margin shed 522 basis points to 9.2% and net margin declined 196 basis points to 8%. The company's liquidity has improved since last year's first quarter as the cash balance grew 56% to $319 million. A quick ratio of 0.92 is less than ideal, but a debt-to-equity ratio of 0.5 is a sign of strength. A significant portion of Cooper's revenue is derived from new construction, which is experiencing further pain. But fundamentals are strong and the stock is cheap.

The stock: Cooper Industries is down 1% in 2009, outperforming the Dow Jones Industrial Average and the S&P 500. The stock trades at a low price-to-earnings ratio of 9 and offers a 3.4% dividend yield.

TheStreet.com Ratings upgraded Empire District Electric ( EDE) to "buy." The company generates and sells electricity in Missouri, Kansas, Oklahoma and Arkansas.

The numbers: Fiscal first-quarter revenue was flat at $136 million as net income ascended 56% to $11 million and earnings per share climbed 52% to 32 cents. Operating margin jumped 487 basis points to 18% and net margin increased 292 basis points to 8%. The cash balance has improved 76% to $8 million since the year-earlier quarter, but the company's quick ratio is still low at 0.4. A debt-to-equity ratio of 1.4 is also a sign of weakness. Utilities such as Empire District are looking more attractive because of their cheap valuations and strong yields.

The stock: Empire District is down 4% in 2009, underperforming the S&P 500 and outperforming the Dow. The stock trades at a price-to-earnings ratio of about 13 and offers a huge 7.6% dividend yield.

TheStreet.com Ratings upgraded MicroFinancial ( MFI) to "buy." The company provides specialized commercial financing, including micro-ticket equipment leasing.

The numbers: Fiscal first-quarter revenue ascended 17% to $11 million as net income more than halved to $600,000 and earnings per share dropped 64% to 4 cents. Still, margins remained healthy. Operating margin declined 1,240 basis points to 14% and net margin fell 1,134 basis points to 5.5%. The debt-to-equity ratio is conservative at 0.55. But the cash balance needs improvement. It has dropped 55% to $2.9 million since last year's first quarter.

The stock: MicroFinancial has had a huge run in 2009, climbing 72% and beating all major U.S. indexes. Yet the stock is still trading at a price-to-earnings ratio of less than 10 and offers a 5.8% dividend yield.

TheStreet.com Ratings upgraded A. Schulman ( SHLM) to "buy." The company supplies plastic compounds and resins to consumer products, industrial, automotive and packaging markets worldwide.

The numbers: Fiscal third-quarter revenue plummeted 42% to $297 million as net income improved 4.4% to $7.5 million and earnings per share climbed 12% to 29 cents. Profitability metrics strengthened on aggressive cost-cutting. Operating margin climbed 77 basis points to 4.6% and net margin jumped 111 basis points to 2.5%. The company has ample liquidity, with $202 million of cash, amounting to a quick ratio of 2.1. And a debt-to-equity ratio of 0.3 indicates conservative leverage.

The stock: Schulman is flat in 2009, better than the Dow Jones Industrial Average and the S&P 500. The stock trades at a high price-to-earnings ratio of 47 and offers a 3.5% dividend yield.

TheStreet.com Ratings upgraded Willis Lease Finance ( WLFC) to "buy." The company leases commercial aircraft engines and other equipment to air carriers, manufacturers and repair facilities.

The numbers: Fiscal first-quarter revenue increased 11% to $35 million as net income ascended 38% to $7 million and earnings per share grew 47% to 72 cents. Operating margin shed 320 basis points to 49%, but net margin improved 396 basis points to 20%. The company has ample liquidity, with $90 million of cash reserves. But a high debt-to-equity ratio of 3.23 indicates excessive leverage.

The stock: Willis Lease has jumped 43% in 2009, outperforming all major U.S. indexes. Yet the stock is trading at an extremely low price-to-earnings ratio of 4.5. The company doesn't pay dividends.

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