Founded in 1869, Goldman Sachs (NYSE:GS) is one of the most reputable banking and securities firms, which employs around 36.000 employees and total assets of $911.3 billion as of 2010. The company engages in investment management, investment banking, securities and other financial services with institutional clients. Goldman Sachs' analysts have recently updated their ratings on some stocks, explaining their opinion about them. I have analyzed these stocks, taking their fundamentals and field performances into account. Here are my opinions on Goldman's five stock ratings.
(Data obtained from Finviz/Morningstar, and current as of January 13. You can download the O-Metrix calculator here.)
3M Co. (MMM)
Terry Darling of Goldman has downgraded the maker of Post-It Notes to "Sell" from "Neutral" "due to inflation in emerging markets, the structural change in Europe and government debt refinancing." The company is selling 14 times earnings and 13 times forward earnings. Estimated annual EPS growth for the next five years is 12.3%. It sports a 2.63% dividend, and the profit margin is 14.6%, higher than the industry average of 8.8%.
As of the time of writing, 3M is trading at $83.6 with a 52-week range of $68 - $97. 3M intends to buy Avery Dennison Corp.'s (NYSE:AVY), which will strengthen 3M's presence in the office supply sector. Dividends are tidy, as well as cash flow and assets. 3M suffered from massive sell-offs in the Q3 of 2011, but the company is showing a healthy recovery since then. 3M is a brilliant pick for your long-term portfolio. The company has an O-Metrix score of 5.42.
Emerson Electric (EMR)
Emerson has been downgraded from "buy" to "neutral" due to "lack of near-term catalysts," as well as the global uncertainty. Emerson shows a trailing P/E ratio of 15.2, and a lower forward P/E ratio of 12.0. Analysts estimate a 12.1% annualized EPS growth for the next five years. With a profit margin of 10.2%, it offers a 3.25% dividend.
As Cramer states, Emerson has a strong HVAC business, and it is one of the key players in power management for data centers. Price-to-earnings ratio has come to very good levels in a short time.
Quarterly dividend per share has been increased from $0.35 to $0.40 in November 2011, which is a solid catalyst for me. Debt-to equity ratio (0.4) is also convincing, below the industry average of 0.7. Assets, revenue, and cash flow are very healthy. In January 4, Emerson had a Relative Strength Index of 38.27%, which is 53.48% as of the time of writing. If you agreed with me and bought the stock at that time, then you could have made about a 4.5% profit in just eight business days. The panic sell-offs have come to an end, and there is still chance to jump in. Emerson has a C Grade O-Metrix score of 5.64.
Rockwell Automation (ROK)
Goldman analysts have upgraded Rockwell from "neutral" to "buy". The automation company is trading at a P/E ratio of 16.6, and a forward P/E ratio of 13.6. Analysts expect the company to have an 11.4% annual EPS growth in the next five years. Profit margin is 11.6%, and dividend yield is 2.14%.
As a stock, Rockwell is doing acceptably well. Earnings-per share [ttm] and P/E ratio have been doing well for some time. Cash flow and revenue are quite appetizing, along with dividends. Rockwell is performing well for a while, returning more than 50% since September 2011. I believe Rockwell can offer average profits with moderate growth. Robert W. Baird is also bullish on this name, raising his target price to $89 from $91 a share. I guess it might be rewarding to hold onto Rockwell in the long term. Based on these indicators, Rockwell has an O-Metrix score of 4.48.
Eaton is a "classic laggard to leader," as Terry Darling describes. The stock is in Goldman's Conviction Buy List. The power management company has a P/E ratio of 13.3, and a lower forward P/E ratio of 10.8. Analysts estimate a 12.2% annualized EPS growth for the next five years. It offers a dividend of 2.77%, and profit margin is 8.1%, slightly below the industry average of 8.8%.
Eaton has a friendly management team, solid fundamentals, and adorable field performance. Dividends, revenue, and cash flow are quite healthy. Since September 2009, earnings-per share [ttm] has come from -0.67 to 3.70. Such a company with strong fundamentals and field performance has almost zero chance of failing, especially if it's paying dividends at this level. Just keep in mind that Relative Strength Index (64.17%) is close to the overbought territory, so you may want to see a pullback before buying. Eaton has a B Grade O-Metrix score of 6.21.
General Electric (GE)
Goldman counts General Electric as its "favorite super-cap for a combination offense and defense." The Connecticut-based company is trading at a P/E ratio of 14.2, and a forward P/E ratio of 12.1. Estimated annualized EPS growth for the next five years is 12.6%. It sports an attractive dividend of 3.59%, while the profit margin is 9.2%, higher than the industry average of 8.8%.
General Electric has been selected as the most popular congressional investment for the sixth time in a row. General Electric will do just fine this year as the company is playing right in the emerging markets, and aircraft engines are trendy. Even since the beginning of the year, the stock has returned about 5% already. Given its performance and growth, we may see another boost in General Electric's dividend this year. I suggested buying this stock in one of my articles three months ago, and the company returned about 15% since then. If you want strong income with a juicy dividend in 2012, then General Electric is your stock. General Electric is next to the overbought territory with a Relative Strength Index of 65.80%, like Eaton. The company has an O-Metrix score of 6.15.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.