Home Depot, StatoilHydro: Ratings Changes

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BOSTON ( TheStreet) -- TheStreet.com's stock-rating model upgraded home-improvement retailer Home Depot ( HD) to "buy."

The numbers: Second-quarter earnings fell 7% to $1.1 billion, or 66 cents a share, as revenue declined 9% to $19 billion. Its operating margin remained less than 10% and its net margin was little changed at 6%. A quick ratio of 0.4 demonstrates weak liquidity, but its cash balance has almost tripled to $3.1 billion from the year-earlier quarter. A debt-to-equity ratio of 0.6 indicates conservative leverage. We give Home Depot a financial strength score of 9.9 out of 10 because of its resilient business model.

The stock: Home Depot has advanced 19% this year, more than the Dow Jones Industrial Average and the S&P 500 Index. The stock trades at a price-to-earnings ratio of 19, on par with the market, and offers a 3.3% dividend yield, less than the average of S&P 500 companies.

The model upgraded packaging maker Sealed Air ( SEE) to "buy."

The numbers: Second-quarter earnings decreased 3% to $61 million, or 33 cents, as revenue fell 20% to $1 billion. Its operating margin jumped from 10% to 12% and its net margin rose from 5% to 6%. A quick ratio of 0.8 indicates less-than-ideal liquidity and a debt-to-equity ratio of 1 reflects a sizable debt load.

The stock: Sealed Air is up 26% this year, outpacing the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 20, a slight premium to the market, and offers a 2.6% dividend yield.

The model upgraded paint retailer Sherwin-Williams ( SHW) to "buy."

The numbers: Second-quarter net income dropped 8% to $158 million, or $1.35, as revenue decreased 13% to $1.9 billion. Its operating margin declined from 13% to 12%, but its net margin topped 8%. Sherwin-Williams has a weak liquidity position, with only $49 million of cash and low quick ratio of 0.5. However, its debt-to-equity ratio of 0.5 indicates restrained leverage.

The stock: Sherwin-Williams has increased 4% this year, less than major U.S. indices. The stock trades at a fair price-to-earnings ratio of 17 and offers a lackluster 2.3% dividend yield.

The model downgraded StatoilHydro ( STO), the Norwegian oil and gas producer, to "hold."

The numbers: Second-quarter earnings plummeted 99% to $45 million, or 1 cent, as revenue dropped 49% to $17 billion. Its operating margin shrank from 36% to 23% and its net margin fell to less than 1%. A quick ratio of 0.7 reflects subpar liquidity, but a debt-to-equity ratio of 0.5 demonstrates a conservative capital structure.

The stock: StatoilHydro has increased 37% this year, outpacing major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 36 and offers a 3% dividend yield.

The model upgraded TeleTech Holdings ( TTEC), which provides customer service to other firms, to "buy."

The numbers: Second-quarter net income decreased 21% to $16 million and earnings per share fell 11% to 25 cents, cushioned by a lower share count. Revenue dropped 16% to $302 million. Its operating margin rose from 9% to 10% and its net margin remained steady at 5%. TeleTech has an ideal financial position, evident in its high quick ratio of 1.9 and low debt-to-equity ratio of 0.1.

The stock: TeleTech has more than doubled this year, trouncing major U.S. indices. The stock trades at a price-to-earnings ratio of 17, a slight discount to the market. The company doesn't pay dividends.

-- Reported by Jake Lynch in Boston.

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