Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- CNH Global (NYSE: CNH) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, a generally disappointing performance in the stock itself and poor profit margins.
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- The revenue growth came in higher than the industry average of 17.8%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CNH GLOBAL NV has improved earnings per share by 30.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CNH GLOBAL NV increased its bottom line by earning $4.72 versus $3.90 in the prior year. This year, the market expects an improvement in earnings ($5.30 versus $4.72).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, CNH GLOBAL NV has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- CNH's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 67.76%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The debt-to-equity ratio is very high at 2.08 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.