This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

"Don't kick a guy when he's down."
That advice isn't just a call for clean fightin', or plain old good manners. It's also a pretty good way to make money in the market. Or so thinks Wall Street analyst Bernstein, which just lent a helping hand to one of the most often down-and-kicked stocks in today's market: Boeing (NYSE: BA).

Bernstein boosted Boeing to "outperform" status on Thursday. It cited the company's hard-hit stock price (down 15% over the past couple of months), its continued success in building and selling every airplane other than the ill-starred 787, and the fact that it has now come clean on the need to delay the test flight and production of its Dreamliner by another three months. According to Bernstein, there's little downside to the stock now that it has fessed up to the bad news.

Good news for Boeing investors? Judging from Bernstein's record, I'd have to say yes -- especially when you lay today's upgrade side-by-side with the downgrade Boeing got from AmTech Research yesterday. When you compare these two analysts ... well, there is no comparison, really.

Let's go to the tape
According to CAPS, where we've been tracking both outfits' records for more than a year now, Bernstein is clearly the better analyst. With a CAPS rating of 93.87 and a record of getting twice as many of its picks right as it gets wrong, Bernstein leaves AmTech, with its 30.58 CAPS rating, and 42% accuracy, eating its vapor trail.

Reviewing each analyst's virtual portfolio of active picks, we find that Bernstein developed its winning record in large part through consumer-products picks.

In contrast, AmTech has racked up considerably more frequent-flyer miles than has Bernstein.

At first glance, AmTech's record on aerospace in particular doesn't look half-bad. Two for three -- can't argue with that. Or can you? If you delve into our CAPS archives to examine AmTech's past picks, you'll find that it has made one aerospace pick even more telling than the three I've shown above: Boeing itself, which AmTech rated as a buy back in October. AmTech about-faced on that one yesterday, but not before costing investors who heeded its advice six points of market underperformance in three months.

Mea culpa
Boeing is also the sole aerospace pick we have on record for Bernstein. In the interests of Fool disclosure, I'll tell you that CAPS is currently inaccurately reporting the results of Bernstein's January 2007 buy rating on Boeing. We somehow missed the Oct. 15 downgrade to "hold." For the record, though, that pick essentially matched the performance of the S&P 500, with Boeing gaining 9.3% and the S&P gaining 9.6% during the nine months the pick was active. (This is why we still call CAPS a "beta" program.)

Foolish takeaway
When you come right down to it, here's how I look at the two analysts dueling over Boeing. AmTech has the greater experience in aerospace, but its record is spotty, and it's particularly bad when it comes to charting Boeing's course. In contrast, Bernstein is the better analyst overall, but it has less experience in aerospace and a slightly less bad record on Boeing than does AmTech.

That all suggests to me that neither analyst's rating is bulletproof. So, by default, I go back to valuation on this one. Boeing's trailing price-to-earnings ratio of 15, when paired with the 14% annual profits growth that most analysts expect out of it, tells me that this stock is, at worst, fairly priced. What's more, if you look a little deeper, you'll see that Boeing generates just gobs of free cash flow -- enough to give this stock a price-to-free cash flow ratio just half that of its P/E.

When I see Boeing selling for a P/FCF ratio of 7.5, and analysts expecting 14% growth out of the stock, I see an opportunity for long-term investors. Call me chivalrous if you must, but I refuse to kick this stock. On the contrary, I'm siding with Bernstein today. Boeing's a buy.