Target, First Bancorp: Rating 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 oil and gas services provider Carbo Ceramics ( CRR) to "buy."

The numbers: Second-quarter net income dropped 31% to $9.4 million and earnings per share declined 15% to 41 cents as revenue fell 22% to $69 million. The operating margin rose from 20% to 21%, but the net margin decreased from 15% to 14%. Carbo Ceramics has an ideal financial position with $92 million of cash, amounting to a high quick ratio of 6.2, and zero debt.

The stock: Carbo Ceramics has advanced 15% in 2009, more than the Dow Jones Industrial Average or S&P 500 Index. The stock trades at an attractive price-to-earnings ratio of 15 and offers a lackluster 1.8% dividend yield.

The model upgraded First Bancorp ( FBNC) to "buy."

The numbers: Second-quarter revenue fell 5% to $40 million, but net income surged 582% to $36 million and earnings per share rocketed 556% to $2.10. The operating margin rose from 29% to 31% and the net margin jumped from 12% to 89%, boosted by a one-time gain related to the Cooperative Bank acquisition.

The stock: First Bancorp is flat in 2009, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 15, indicating a discount to peers and the market, and offers a 1.7% dividend yield, less than the average of S&P 500 companies.

The model initiated coverage of machinery maker John Bean Technologies ( JBT) at "sell."

The numbers: Second-quarter net income decreased 25% to $9.7 million, or 34 cents a share, as revenue declined 17% to $230 million. The operating margin hovered above 7% and the net margin fell from 5% to 4%. The company has a less-than-ideal liquidity position, evident in its quick ratio of 0.6. And a debt-to-equity ratio over 10 indicates excessive leverage.

The stock: John Bean Technologies has more than doubled in 2009, trouncing major U.S. indices. The stock trades at a price-to-earnings ratio of 15, indicating a discount to peers and the market, and offers a 1.7% dividend yield. The company's weak financial position is a cause for concern.

The model upgraded King Pharmaceuticals ( KG) to "hold."

The numbers: Second-quarter revenue rose 12% to $445 million, but net income decreased 7% to $38 million and earnings per share dropped 12% to 15 cents, hurt by a higher share count. The operating margin dropped from 26% to 24% and the net margin dipped from 10% to 9%. Around $485 million of cash and a quick ratio of 1.4 demonstrate ample liquidity. And a debt-to-equity ratio of 0.3 indicates fiscal prudence.

The stock: King Pharmaceuticals is down 4% in 2009, underperforming major U.S. indices. The company doesn't pay dividends.

The model upgraded retailer Target ( TGT) to "buy."

The numbers: Second-quarter net income dropped 6% to $594 million and earnings per share fell 4% to 79 cents as revenue declined 3% to $15 billion. The operating margin remained steady below 8% and the net margin dipped below 4%. Target has a less-than-ideal liquidity position, reflected by a quick ratio of 0.8. An $18 billion debt load and a debt-to-equity ratio of 1.2 indicate excessive leverage. But we give Target a financial strength score of 8.9 out of 10 due to its resilient revenue.

The stock: Target has advanced 31% in 2009, outpacing major U.S. indices. The stock trades at a fair price-to-earnings ratio of 16 and offers a 1.5% dividend yield.

-- Reported by Jake Lynch in Boston.

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