TSC Ratings' Updates: Murphy Oil

• ByTSC Ratings,
• On 4:27 pm EDT, Monday May 4, 2009

TSC 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 solid outperformance on a total return basis.

The following ratings changes were generated on Monday, May 4.

We've upgraded Canadian National Railway from hold to buy, driven by its increase in net income, expanding profit margins, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Net income rose 36.3% compared with the year-ago quarter, from $311 million to $424 million. The 39.3% gross profit margin has increased since the year-ago quarter, and net profit margin is 22.8%. Net operating cash flow is up 92.7% to $318 million from the same quarter last year. The 0.77 debt-to-equity ratio is below the industry average, and the quick ratio is 0.7. Revenue dropped 3.5% since the year-ago quarter but outperformed the industry average. Earnings per share increased.

We've upgraded Murphy Oil from hold to buy, driven by its largely solid financial position with reasonable debt levels by most measures, notable return on equity and attractive valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Murphy's debt-to-equity ratio of 0.16 is below the industry average, and it has a quick ratio or 1.12. Return on equity has increased compared with the year-ago quarter. Revenue fell by 20.1% but outperformed the industry average. EPS decreased. Net income fell 38.2% compared with the year-ago quarter. From $206.12 million to $127.37 million.

We've upgraded Otter Tail from hold to buy, driven by its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Revenue increased by 1.4% since the same quarter last year, though EPS declined. Net operating cash flow increased by 157.7% to $71.1 million. The 0.7 debt-to-equity ratio is below the industry average. The quick ratio is 0.52. EPS declined 17.4% in the most recent quarter compared with the year-ago quarter, and we anticipate the company's yearlong pattern of declining EPS to reverse in the coming year. Net income fell 2.6% compared with the year-ago quarter, from $14.1 million to $13.8 million.

We've upgraded Trustmark from hold to buy, driven by its increase in net income, expanding profit margins, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Net income increased by 1.2% compared with the year-ago quarter, from $26.2 million to $26.5 million. Trustmark's gross profit margin of 73.1% has increased from the year-ago quarter. Revenue fell 10.2% since the year-ago quarter and EPS decreased. ROE also fell.

We've upgraded Xilinx from hold to buy, driven by its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Gross profit margin of 65.5% has decreased from the same period last year. Net profit margin of 17.9% outperformed the industry. The 0.4 debt-to-equity ratio is above the industry average, while the quick ratio is 6.61. Revenue fell by 17% since the year-ago quarter, and EPS decreased. Net income fell 26.9%, from $96.5 million to $70.5 million. ROE also decreased.

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Note: Our quantitative model makes stock recommendations based on GAAP figures that may differ materially from data as reported by the companies themselves. As a result, rating changes are occasionally driven by so-called nonrecurring items. As always, we urge readers to use TSC Ratings' reports in conjunction with additional information to construct their opinions on the value that should be placed on any given stock.

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