7 Stocks With Upgrades: LM, SU, DO, KCG, HUN, VCI, MRH

Tickers in this article: DO HUN KCG LM MRH SU VCI

NEW YORK (TheStreet) -- The following stocks were upgraded to buy at TheStreet Ratings on Tuesday: Legg Mason , Suncor Energy , Diamond Offshore Drilling , Knight Capital Group , Huntsman , Valassis Communications and Montpelier RE Holdings .

Legg Mason

The asset management firm reported earlier this month that it had $631 billion in assets under management as of the end of January. Legg Mason had $672 billion in assets under management the prior year and $627 million in assets under management in December.

"Consistent with prior comments, management expects that better performance at Western coupled with a solid performance in global bonds, dividend oriented equities, and muni funds, among other things, should all support improved flow trends over the coming quarters, although management made no predictions with regard to when flows will turn positive," Keefe, Bruyette & Woods analysts wrote in a Feb. 15 report. "One road block to improving the optics of flow trends remains the large (about $25bn of AUM) very low fee (2-3bps pre-revenue share) sovereign wealth fund mandate that continues to be in outflow to the tune of $3bn-plus per quarter. Nevertheless, management came across feeling more confident that they had a broader array of attractive products to offer investors than at any time over the past several years."

Shares of Legg Mason were upgraded to buy from hold by TheStreet Ratings.

"The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and good cash flow from operations," TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Legg Mason has an estimated price-to-earnings ratio for next year of 13.89; the average for asset management companies is 13.94. For comparison, BlackRock and State Street both have lower forward P/Es of 13.26 and 8.98, respectively.

Of the 19 analysts who cover the company, 10 gave it a hold rating. Six analysts rated Legg Mason a buy and three gave it a sell rating.

TheStreet Ratings gives Legg Mason a B grade and $31.46 price target. The stock closed Friday at $27.32 and has risen 13.6% year to date.

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Suncor Energy

The integrated energy company reported last month fourth-quarter earnings of $1.42 billion, or 91 cents a share, up from year-earlier earnings of $1.29 billion, or 82 cents.

"While the company didn't raise its guidance this morning (at least from what we can see), we are raising our 2012 ex-Syncrude oil sands production estimate (once again after doing so last week) to 365 MBbl/d from 357 MBbl/d resulting in us increasing our total company production estimate for the year by almost 1.5% to 586.5 MBOE/d (compares to SU's 2012 total company guidance range of 530-580 MBOE/d)," Canaccord analysts wrote in a Feb. 6 report. "Accordingly, we are raising our 2012 EPS/CFPS estimates by $0.03/$0.06 to $2.92/$6.05, respectively."

Shares of Suncor Energy were upgraded to buy from hold by TheStreet Ratings.

"The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, attractive valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures," TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Suncor Energy has a forward P/E of 8.82; the average for integrated oil and gas companies is 10.8. For comparison, Imperial Oil has a higher forward P/E of 11.3.

Of the 23 analysts who cover the company, 19 rated it a buy and four gave it a hold rating.

TheStreet Ratings gives Suncor Energy a B- grade and a $39.65 price target. The stock closed Friday at $34.29 and has increased 18.94% year to date.


Diamond Offshore Drilling

The offshore oil and gas drilling company reported earlier this month fourth-quarter earnings of $188 million, or $1.36 a share, down from year-ago earnings of $242 million, or $1.74.

"The company's recent announcement of an upgrade to one of its stacked midwater floaters (with the possibility for a second upgrade) should add to earnings power, but the need for a broader fleet recapitalization remains," Deutsche Bank analysts wrote in a Feb. 10 report. "The significant capital requirement associated with this process and the resultant uncertainty over the sustainability of the special dividend policy leads us to a HOLD rating."

Shares of Diamond Offshore Drilling were upgraded to a buy from a hold by TheStreet Ratings.

Diamond Offshore Drilling has a forward P/E of 12.82; the average for oil equipment and services companies is 13.82. For comparison, Helmerich & Payne has a lower forward P/E of 11.16; Cameron International has a forward P/E of 12.85.

Nineteen of the 36 analysts who cover Diamond Offshore Drilling rated it a hold. Eight analysts gave it a buy rating and nine considered it a sell.

TheStreet Ratings gives Diamond Offshore Drilling a B- grade and a $73.91 price target. The stock closed Friday at $64.78 and has risen 17.23% year to date.

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Knight Capital Group

The financial services firm reported last month fourth-quarter earnings of $40.2 million, or 43 cents a share, up from year-ago earnings of $9.2 million, or 10 cents.

"January, 2012 volumes were mostly down on a yr/yr basis given tough compares and continued softness across markets," Wells Fargo analysts wrote in a Feb. 14 report. "However, US equities volumes were up from December and we think it likely volume activity accelerated at KCG through the month similar to performance at the e-brokers. While we are mildly encouraged by signs implying retail investor confidence is rising, conditions remain difficult, at least near term."

Shares of Knight Capital Group were upgraded to buy from hold by TheStreet Ratings.

Knight Capital Group has a forward P/E of 7.94; the average for investment services companies is 11.04. For comparison, NYSE Euronext and Raymond James Financial both have higher forward P/Es of 9.53 and 11.75, respectively.

Seven of the 11 analysts who cover Knight Capital Group rated it a hold; four analysts gave it a buy rating.

TheStreet Ratings gives Knight Capital Group a B grade with a $15.33 price target. The stock closed Friday at $13.27 and has increased 12.27% year to date.


Huntsman

The chemicals company reported last week fourth-quarter earnings of $68 million, or 28 cents a share, up from year-ago earnings of $60 million, or 25 cents.

"We are lowering 2012E EPS $0.25 to $1.55 and 2013E $0.15 to $1.75 to reflect a deterioration in the outlook for Pigments as pricing power appears likely to continue to lag raw material pressure, but by a wider margin than we had expected," Jefferies analysts wrote in a Feb. 17 report. "Polyurethanes should improve YoY, but the year hinges on price increases catching up with raw materials in 1H12. Advanced Materials should benefit from demand stabilization and a $20m (savings) restructuring program. Performance Products should see near-term pressure in specialty amines from capacity expansions."

Shares of Huntsman were upgraded to buy from hold by TheStreet Ratings.

"The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations," TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company shows low profit margins."

Huntsman has a forward P/E of 6.47; the average for commercial chemicals companies is 12.3. For comparison, DuPont and Dow Chemical both have higher forward P/Es of 10.71 and 10.24, respectively.

Of the 11 analysts who cover Huntsman, six rated it a hold and five gave it a buy rating.

TheStreet Ratings gives Huntsman a B- grade with a $16.16 price target. The stock closed Friday at $13.79 and has risen 37.9% year to date.

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Valassis Communications

The marketing services and media company reported last week fourth-quarter earnings of $42.8 million, or 95 cents a share, up from year-ago earnings of $24.8 million, or 47 cents.

"While impressed with Q4's shared mail growth, seasonal contributions will likely not be repeated leaving potential for continued lumpy y/y trends ahead," Piper Jaffray analysts wrote in a report Tuesday. "We have increased confidence Valassis can hit its 3%+ shared mail growth target in FY12, but q/q volatility will not find support in other business segments facing unique challenges, which leaves a stock not for the faint of heart."

Shares of Valassis Communications were upgraded to buy from hold by TheStreet Ratings.

Valassis Communications has a forward P/E of 7.16; the average for media agencies is 24.43. For comparison, comScore and ValueClick both have higher forward P/Es of 16.14 and 10.7, respectively.

Of the 11 analysts who cover Valassis, eight rated the stock a buy and three gave it a hold rating.

TheStreet Ratings gives Valassis Communications a B grade with a $30.39 price target. The stock closed Friday at $25.58 and has risen 33.02% year to date.


Montepelier Re Holdings

The insurance and reinsurance company reported earlier this month fourth-quarter earnings of $28.5 million, or 40 cents a share, down from year-ago earnings of $41.8 million, or 63 cents.

"The company has taken steps in recent months (sale of MUSIC, Torus deal) to free up capital and position itself to be able to write more property business," Sterne Agee analysts wrote in a Feb. 10 report. "However, while pricing has increased in property catastrophe lines, management has held back on deploying capacity to position for potentially better rate going forward. The company in our view continues to have flexibility for further repurchase going forward with year-end equity of $1.55 billion about $50 mm higher than the company's stated goal of maintaining at least $1.5 billion of capital."

Shares of Montepelier Re Holdings was upgraded to buy from hold by TheStreet Ratings.

"The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures," TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Montepelier Re Holdings has a forward P/E of 8.39; the average for reinsurance companies is 8.41. For comparison, Everest Re Group has a lower forward P/E of 7.25; Alterra Capital Holdings' forward P/E is 9.94.

All five of the analysts who cover Montepelier Re Holdings rated it a hold.

TheStreet Ratings gives Montepelier Re Holdings a B grade and $21.18 price target. The stock closed Friday at $18.45 and has risen 3.94% year to date.

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-- Written by Alexandra Zendrian

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Tickers in this article: DO HUN KCG LM MRH SU VCI