Energy, Utilities Upgraded: 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 Commerce Bancshares ( CBSH) to "buy."

The numbers: Second-quarter net income decreased 34% to $37 million and earnings per share fell 35% to 48 cents as revenue declined 3% to $295 million. The operating margin descended from 36% to 32% and the net margin dropped from 18% to 13%. Commerce has an adequate capital position, evident in its $424 million of reserves and tier-1 capital ratio of 11.4%. However, a debt-to-equity ratio of 1.2 is higher than ideal.

The stock: Commerce Bancshares has fallen 13% in 2009, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 21, indicating a premium to the market, and offers a 2.5% dividend yield, less than the average of S&P 500 companies.

The model upgraded Motorcar Parts of America ( MPAA) to "hold."

The numbers: Fiscal first-quarter earnings dropped 60% to $1.2 million, or 10 cents a share, as revenue remained steady at $33 million. The operating margin deteriorated from 14% to 9% and the net margin fell from 9% to 4%. A quick ratio of 0.2 indicates weak liquidity. But the cash balance has doubled to $1.5 million since the year-earlier quarter. A debt-to-equity ratio of 0.3 reflects modest leverage.

The stock: Motorcar Parts has increased 31% in 2009, more than major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 31 and doesn't pay dividends.

The model upgraded casino operator Penn National Gaming ( PENN) to "hold."

The numbers: Second-quarter net income decreased 23% to $29 million and earnings per share fell 36% to 27 cents as revenue declined 6% to $581 million. The operating margin declined from 18% to 15% and the net margin dropped from 6% to 5%. A quick ratio of 2 and $795 million of cash indicate ample liquidity. But a debt-to-equity ratio of 1.1 indicates higher-than-ideal leverage.

The stock: Penn National Gaming has advanced 44% in 2009, outpacing major U.S. indices. The stock doesn't pay dividends.

The model upgraded utility Integrys Energy ( TEG) to "hold."

The numbers: Second-quarter net income ascended 43% to $36 million and earnings per share climbed 45% to 45 cents as revenue plummeted 58% to $1.4 billion. The operating margin jumped from 2% to 6% and the net margin rose from 1% to 2%. Integrys has an inadequate liquidity position, evident in its quick ratio of 0.3. But the cash balance has grown 349% to $206 million since the year-earlier quarter. A debt-to-equity ratio of 0.9 is below the industry average and indicates reasonable leverage.

The stock: Integrys has fallen 20% in 2009, underperforming major U.S. indices. The stock offers a huge 7.9% dividend yield, but a history of scattered net losses demonstrates the company's inconsistent operating performance.

The model upgraded utility Wisconsin Energy ( WEC) to "buy."

The numbers: Second-quarter earnings increased 10% to $64 million, or 54 cents a share, as revenue dropped 11% to $843 million. The operating margin jumped from 2% to 7% and the net margin rose from 6% to 8%. The company has a weak liquidity position, reflected by $186 million of cash and a low quick ratio of 0.3. And a debt-to-equity ratio of 1.4 indicates excessive leverage.

The stock: Wisconsin Energy is up 7% in 2009, outpacing the Dow Jones Industrial Average, but underperforming the S&P 500 Index. The stock trades at a fair price-to-earnings ratio of 14 and offers a 3% dividend yield.

-- Reported by Jake Lynch in Boston.

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