Schwab, Evercore, Pactiv: Ratings Changes

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BOSTON ( TheStreet) -- TheStreet.com's stock-rating model upgraded Arch Chemicals ( ARJ), whose products are used to treat water and kill harmful microbes, to "buy."

The numbers: Second-quarter net income dropped 7% to $31 million, or $1.23 a shares, as revenue fell 12% to $414 million. Its operating margin inched past 12% and its net margin hovered above 7%. Arch has a less-than-ideal liquidity position, reflected by a quick ratio of 0.9. But a debt-to-equity ratio of 0.7 indicates reasonable leverage and is lower than the industry average.

The stock: Arch is up 12% this year, beating the Dow Jones Industrial Average and the S&P 500 Index. The stock trades at an expensive price-to-earnings ratio of 23 and offers a mediocre 2.7% dividend yield, less than the average of S&P 500 companies.

The model upgraded Dime Community Bancshares ( DCOM) to "buy."

The numbers: Second-quarter revenue increased 5% to $54 million, but net income dropped 18% to $6.8 million, or 21 cents. Its operating margin hovered above 48% and its net margin deteriorated from 16% to 13%. The bank is adequately capitalized with $229 million of cash reserves, but a debt-to-equity ratio of 4.5 suggests heavy dependence on debt.

The stock: Dime Community has dropped 7% this year, underperforming major U.S. indices. The stock trades at a fair price-to-earnings ratio of 17, a sizable discount to peers, and offers an attractive 4.5% dividend yield, higher than the average of S&P 500 companies.

The model upgraded boutique investment bank Evercore Partners ( EVR) to "hold."

The numbers: Second-quarter revenue rose 14% to $77 million, but Evercore swung to a net loss of $6 million, or 43 cents, from profit of $2 million, or 16 cents, in the year-earlier quarter. Its operating margin declined from 24% to 12% and its net margin sank into negative territory. Evercore has a stable financial position, reflected by $543 million of cash and a quick ratio of 1.7. But a debt-to-equity ratio of 1.6 demonstrates excessive leverage. Still, the company has pared its debt by 9% to $368 million since last year's second-quarter. Excluding one-time charges, the company was profitable during the quarter, helped by revenue from restructuring companies.

The stock: Evercore has climbed 90% this year, trouncing major U.S. indices. The stock has a mediocre 2% dividend yield.

The model upgraded packaging maker Pactiv ( PTV) to "buy."

The numbers: Second-quarter revenue fell 5% to $901 million, but net income surged 57% to $96 million and earnings per share climbed 49% to 73 cents, restrained by a higher share count. Its operating margin jumped from 14% to 20% and its net margin rose from 6% to 11%. A quick ratio of 1.2 reflects Pactiv's strong liquidity position, but a debt-to-equity ratio of 1.6 indicates a sizable debt burden.

The stock: Pactiv has advanced 6% this year, less than major U.S. indices. The stock trades at a cheap price-to-earnings ratio of 11, but the company doesn't pay dividends.

The model upgraded retail brokerage Charles Schwab ( SCHW) to "buy."

The numbers: Second-quarter net income fell 31% to $205 million, or 18 cents, as revenue dropped 16% to $1.1 billion. Its operating margin deteriorated from 41% to 33% and its net margin decreased from 22% to 18%. The company has an outstanding liquidity position with over $25 billion of cash and equivalents. A debt-to-equity ratio of 0.3 indicates modest leverage.

The stock: Schwab has advanced 16% this year, beating the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 21, which is a slight premium to the market, but a discount to brokerage peers. Shares pay a lackluster 1.3% dividend yield.

-- Reported by Jake Lynch in Boston.

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