TheStreet.com 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 total return performance.TheStreet.com's stock-picking model downgraded Bank of New York Mellon ( BK) to "hold." The company provides custody and data-tracking services for financial firms. The numbers: Second-quarter revenue fell 30% to $3.1 billion, but net income increased 33% to $412 million. Earnings per share decreased 12% to 23 cents, hurt by a higher share count. The operating margin expanded from 19% to 43% and the net margin jumped from 7% to 13%. The company has an adequate liquidity position, with $3.7 billion of cash reserves. And a debt-to-equity ratio of 0.8 indicates reasonable leverage. The stock: Bank of New York is down 3% this year, trailing the Dow Jones Industrial Average and the S&P 500 Index. Still, it's up 40% from its March 6 low. The shares are trading at a fair price-to-earnings ratio of 14, but offer a lackluster 1.3% dividend yield. The model upgraded software maker Citrix Systems ( CTXS) to "buy." The numbers: Second-quarter revenue inched up to $393 million as net income rose 23% to $43 million and earnings per share climbed 28% to 23 cents, helped by a lower share count. The operating margin increased from 7% to 11% and the net margin ascended from 9% to 11%. Zero debt, $580 million of cash and a quick ratio of 1.1 indicate a well-managed balance sheet. The stock: Citrix is up 56% this year, outperforming major U.S. indices, but still has upward momentum. The stock trades at an exorbitant price-to-earnings ratio of 45 and doesn't pay dividends. The model downgraded Host Hotels & Resorts ( HST), a real estate investment trust that buys hotels, to "sell."
The numbers: Second-quarter revenue decreased 26% to $1 billion as the company swung to a net loss of $68 million, or 12 cents, from a profit of $183 million, or 31 cents, in the year-earlier period. The operating margin fell from 20% to 1% and the net margin dropped into negative territory. The company has a disappointing financial position with just $1.3 billion of cash and over $6 billion of debt. But a significant debt load is common for REITs. The stock: Host has increased 15% this year, outperforming the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 19 and didn't pay its most recent quarterly dividend. We think the share price is out of sync with growth expectations. The model upgraded Qualcomm ( QCOM) to "buy." The company sells wireless communications products and services. The numbers: Fiscal third-quarter revenue was roughly flat at $2.8 billion as earnings fell 2% to $738 million, or 44 cents per share. The operating margin improved from 30% to 33% and the net margin remained stable at 27%. Qualcomm has no debt or interest expenses, and has $9.9 billion of reserves, amounting to a high quick ratio of 4.6. The stock: Qualcomm is up 32% this year, outperforming major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 47 and offers a lackluster 1.4% dividend yield. While the company's fiscal fourth-quarter guidance was less than analysts expected, TheStreet.com Ratings' model gave high marks for its strong financial position and revenue.
The model upgraded lubricant maker WD-40 ( WDFC) to "buy." The numbers: Fiscal third-quarter revenue decreased 16% to $69 million as earnings dropped 15% to $6.9 million, or 41 cents per share. The operating margin increased from 15% to 16% and the net margin expanded marginally to 10%. WD-40 has $36 million of cash reserves, which translates to a strong quick ratio of 1.8. Its debt-to-equity ratio of 0.2 indicates modest leverage. The stock: WD-40 is up 11% this year, beating the Dow and S&P 500. The stock trades at an expensive price-to-earnings ratio of 22, but offers an attractive 3.2% dividend yield.