Merck, Provident: Ratings Changes

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.

BOSTON ( TheStreet) -- TheStreet.com's stock-rating model upgraded consumer lender EZCORP ( EZPW) to "buy."

The numbers: Fiscal third-quarter net income jumped 33% to $14 million and earnings per share climbed 16% to 29 cents, restrained by a higher share count. Revenue rose 37% to $148 million. Its operating margin fell below 15% and its net margin dipped below 10%. EZCORP holds $47 million of cash reserves, amounting to a strong quick ratio of 3.5. And a debt-to-equity ratio of 0.1 indicates minimal leverage.

The stock: EZCORP has dropped 21% this year, lagging behind major U.S. indices. The stock trades at a cheap price-to-earnings ratio of 9, but the company doesn't pay dividends.

The model upgraded drug maker Merck ( MRK) to "buy."

The numbers: Second-quarter net income fell 12% to $1.6 billion, or 74 cents a share, as revenue dropped 3% to $5.9 billion. Its operating margin increased from 26% to 28% and its net margin shrank from 29% to 26%. A quick ratio of 1.8 demonstrates ample liquidity and a debt-to-equity ratio of 0.5 indicates conservative leverage. We give Merck a financial strength score of 8.9 out of 10, higher than the "buy"-list average.

The stock: Merck is up 2% this year, trailing behind major U.S. indices. The stock trades at a cheap price-to-earnings ratio of 12 and offers a 4.9% dividend yield, higher than the average of companies in the S&P 500 Index.

The model upgraded insurer Old Republic International ( ORI) to "hold."

The numbers: In the second quarter, the company lost $16 million, or 7 cents, down from a loss of $365 million, or $1.58, in the year-earlier period. Revenue increased 80% to $913 million. Its operating and net margins remained in negative territory, but the company's financial position improved. Its cash balance has grown 63% to $1 billion since last June. And its debt-to-equity ratio is low at 0.1.

The stock: Old Republic has dropped 8% this year, falling short of major U.S. indices. The stock offers an attractive 6.2% dividend yield, higher than the average of S&P 500 companies.

The model upgraded Provident Energy Trust ( PVX), a fund that invests in oil and gas, to "hold."

The numbers: In the second quarter, the company cut its loss by half to $80 million, or 31 cents, from $184 million, or $1.03, a year earlier. Revenue fell 54% to $409 million. Its operating and net margins were negative. Provident has a weak liquidity position, with just $1 million of cash and a quick ratio of 0.5. A debt-to-equity ratio of 0.5 indicates conservative leverage.

The stock: Provident is up 14% this year, beating the Dow Jones Industrial Average and S&P 500. The company offers a huge 13% dividend yield.

The model upgraded conglomerate Seaboard ( SEB) to "buy."

The numbers: Second-quarter revenue fell 13% to $870 million, but net income rose 28% to $27 million, or $21.76. Its operating margin was less than 1% and its net margin increased from 2% to 3%. A quick ratio of 1.4 and debt-to-equity ratio of 0.1 indicate fiscal prudence.

The stock: Seaboard is down 9% this year, underperforming major U.S. indices. The stock trades at a fair price-to-earnings ratio of 14, but offers a dividend yield less than 1%.

-- Reported by Jake Lynch in Boston.

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