GE, Constellation Brands: Ratings Upgrades

Stock quotes in this article: GE , CLX , CM , STZ , TRI  

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 household-products maker Clorox(CLX) to "buy."

The numbers: Fiscal fourth-quarter revenue increased marginally to $1.5 billion, but net income ascended 8% to $170 million and earnings per share climbed 6% to $1.20, restrained by a higher count. The operating margin rose from 19% to 21% and the net margin inched past 11%. Clorox has a weak liquidity position, evident in its quick ratio of 0.4. And $3.1 billion of debt indicates sizable leverage.

The stock: Clorox is up 3% in 2009, underperforming major U.S. indices. The stock trades at a fair price-to-earnings ratio of 15 and offers a 3.5% dividend yield.

The model upgraded Canadian Imperial Bank of Commerce(CM) to "hold."

The numbers: Fiscal second-quarter revenue rose 29% to $3.1 billion, but the company swung to a net loss of $51 million, or 24 cents a share, from a loss of $1.1 billion, or $3 a share, a year earlier. The operating margin climbed from negative territory to 6% and the net margin remained in shallow negative territory. The company has adequate liquidity, reflected by $8.3 billion of cash. But $59 billion of debt indicates excessive leverage.

The stock: Canadian Imperial has advanced 45% in 2009, more than major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 53, but offers a 5.3% dividend yield, higher than the average of S&P 500 companies.

The model upgraded conglomerate General Electric(GE) to "hold."

The numbers: Second-quarter net income dropped 47% to $2.7 billion and earnings per share fell 52% to 26 cents, hurt by a higher share count, as revenue declined 16% to $39 billion. The operating margin decreased from 28% to 20% and the net margin descended from 11% to 7%. GE holds $52 billion of cash reserves, but a debt-to-equity ratio of 4.6 and $4.6 billion of quarterly interest expenses indicate excessive leverage.

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