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Tuesday was a glamorous day for the equities. The stocks made huge gains Tuesday, whereas precious commodities plummeted. Dow Jones gained 2.97%, S&P 500 gained 3.43%, and Nasdaq gained 4.29%. While equity markets were enjoying this momentum, analysts upgraded 5 stocks and downgraded 4 stocks. I have examined these stocks from fundamental perspective, adding my O-Metrix Grading System where possible.

Upgrades

Company

Ticker

Market Cap

Analyst

Status

Target Price

Kimberly-Clark

KMB

$26.35 Billion

Barclays Capital

Underweight-to-Equal Weight

$60- $69

NRG Energy

NRG

$5.24 Billion

UBS

Neutral-to-Buy

$26-$26

Alkermes, Inc.

ALKS

$1.52 Billion

UBS

Neutral-to-Buy

$20.5-$21

Healthways

HWAY

$408.78 Million

JMP Securities

Mkt Underperform-to-Mkt Perform

Whitestone REIT

WSR

126.82 Million

Hilliard Lyons

Neutral-to-Buy

$12.50

Downgrades

Company

Ticker

Market Cap

Analyst

Status

Target Price

Walgreen

WAG

$31.40 Billion

Barclays Capital

Equal Weight-to-Underweight

$39-$29

Public Service Enterprise

PEG

$16.35 Billion

UBS

Buy-to-Neutral

$35-$33

Rockwell Collins

COL

$7.21 Billion

Wedbush

Outperform-to-Neutral

$71-$53

Suntech Power

STP

$935.03 Million

Ardour Capital

Hold-to-Sell

$7.5-$3

Collins Stewart

Neutral-to-Sell

$5.5-$4

Data obtained from Finviz/Morningstar and is current as of August 23.

Kimberly-Clark was upgraded by Barclays Capital with a target price of $69. Analysts have an average target price of $70.46, implying 5% upside potential. The stock gained 2.27% on Tuesday. The year to date return is 9%. With a market cap of $26.35 billion, a yield of 4.16%, and a low Beta of 0.39, Kimberly Clark is a safe stock to invest in. While the debt/equity ratio of 1.35 is a red flag, the stock is trading with a fair P/E ratio of 15.90, and a forward P/E ratio of 12.76. Based on an annualized EPS growth estimate of 7.8%, Kimberly-Clark has an O-Metrix score of 4.3.

NRG Energy was upgraded by UBS with a target price of $26. Analysts have an average target price of $27.33, implying 25% upside potential. The stock gained 2.5% on Tuesday. The year to date return is 11.16%. NRG has a 4-star rating from Morningstar. The stock is trading with a low P/E ratio of 9.53, but the forward P/E ratio of 16.97 is too high for a utility company. Unlike most utility companies, NRG does not have a dividend yield. Debt/equity ratio of 1.07 is a red flag. Nevertheless, based on an annualized EPS growth estimate of 21.15%, NRG has an O-Metrix score of 7.7.

Alkermes was also upgraded by UBS. The upgraded target price is $21. Analysts have a mean target price of $20.5, implying 24% upside potential. The stock gained 6.36% on Tuesday. The year to date return is 26.71%. At a price of $15.56, the stock is trading 58% higher and 22% lower than its 52-week high. Its 52-week trading range is $9.85 - $20. It is a highly speculative stock. However, unlike many other speculative stocks, it has no debt problems. The current ratio of 6.77 and quick ratio of 6.39 are among the best in the industry. It is risky, but could be profitable. Invest at your own risk.

Healthways was upgraded by JMP securities from market underperform to market perform. The stock gained 7.63%, thanks to the upgrade. Healthways is a specialized healthcare services provider. The company is highly profitable with a gross margin of 29.73%. Analysts’ mean target price of $17.71 implies almost 50% upside potential. The company is trading with a low P/E ratio of 11.78, and a lower forward P/E ratio of 10.37. Based on an annualized EPS growth estimate of 8.47%, it has a PEG ratio of 1.39, and an O-Metrix score of 3.86.

Whitestone was upgraded by Hilliard Lyons with a target price of $12.5. The stock gained 3.87% yesterday. The year-to-date return is -18.03%. Analysts’ mean target price of $14.63 implies 30% upside potential. While the yield of 9.87% is nifty, the payout ratio is 630%. P/E ratio is 52.50, and forward P/E ratio is 29.62. The stock is trading 20% lower than its 52-week high. If the momentum keeps on, the stock can re-test its previous peaks. Nevertheless, both the company and the stock have high-risk profiles.

Walgreen was downgraded by Barclays Capital. Barclays reduced its target price from $39 to $29. The stock was also downgraded by Barrington Research in June. UBS still has a buy rating with a target price of $51. I think the downgrade is ill-timed. The stock already lost 21% in the last quarter. It is trading with a low P/E ratio of 13.55 and a forward P/E ratio of 11.56. It has a yield of 2.60%. Walgreen is listed as a drug store, but it offers almost anything you can find at a retailer. Besides, it has a pretty high gross margin of 28.44%. Based on an annualized EPS growth estimate of 13.94%, it has a low PEG ratio of 0.97, and an O-Metrix score of 6.62.

Public Service Enterprise was downgraded by UBS from buy to neutral rating. Yet, the stock managed to gain 1.29% despite the downgrade. Since the last year, the stock has been a slow but steady mover. It has a low Beta of 0.5. 52-week trading range is $28-$34. While the debt/equity ratio of 0.7 is a red flag, the company offers a nifty yield of 4.24%. It is trading with a low P/E ratio of 10.13, and a forward P/E ratio of 12.67. Based on an annualized EPS growth estimate of 5.5%, it has a PEG ratio of 2.3, and an O-Metrix score of 3.91.

Rockwell Collins was downgraded by Wedbush from outperform to neutral with a target price of $53. The downgrade could not stop Rockwell Collins from gaining 2.35% on Tuesday. The stock lost 17.75% in a month and 21.47% in the last quarter. I think the downgrade came at a time when the stock was already at the bottom. It is already trading 30% below its 52-week high. It has a low P/E ratio of 12.16, and a lower P/E ratio of 10.34. Even with a low payout ratio of 25%, yield stands at 2.05%. Based on an annualized EPS growth of 10%, Rockwell Collins has a PEG ratio of 1.22, and an O-Metrix score of 5.31.

Suntech Power was simultaneously downgraded by Ardour Capital and Collins Steward. Ardour Capital reduced its target to $3, and Collins Steward reduced its target to $4. This is the second time the stock is downgraded by Ardour in a week. Last week’s target price was $5.5. Interestingly, the stock gained 2.37% on Tuesday. The company recently reported its second quarter results: Revenues were up by 32.9% from the same period of 2010, whereas the net losses amounted to $0.19 per share. The stock is behaving independent of the company. On the paper, the stock looks like a great deal with single digit P/E ratios and double digit growth estimation. However, it is a Chinese stock, which lost 32.25% in a quarter and 46.77% in the last 6 months. At such low prices, it can be added to the speculative part of your portfolio.

Find more information on O-Metrix Grading System here.

Source: A Critical Look At 5 Recent Upgrades And 4 Recent Downgrades