Southwest Airlines (LUV) canceled 300 flights on Sunday, to inspect 79 Boeing (BA) 737-300 planes to address possible "skin fatigue". Overall option implied volatility of 29 is below its 26-week average of 32 according to Track Data, suggesting decreasing price movement.

KB Home (KBH) April put option implied volatility is at 52, May is at 45; compared to its 26-week average of 46 according to Track Data, suggesting larger near term price movement into its expected release of Q1 results on April 5.

Update is by Stock Specialist Paul Foster of theflyonthewall.com

Analyst Upgrades

• Disney (DIS) to buy from hold at Wunderlich.
• Pike Electric (PIKE) to outperform from market perform at FBR Capital.
• Kindred Healthcare (KND) to overweight from equal weight at Barclays.
• UBS (UBS) to hold from sell at Canaccord.
• Avery Dennison (AVY) and Take-Two (TTWO) to buy from neutral at BofA/Merrill.
• Mercer (MERC) to outperform from market perform at Raymond James.

Analyst Upgrades

• FedEx (FDX) and Concur Tech (CNQR) to outperform from neutral at RW Baird.
• Hershey (HSY) to outperform from neutral at Credit Suisse.
• Open Text (OTEX) to outperform from sector perform at RBC Capital.
• Bemis (BMS) and Hudson Pacific (HPP) upgraded to buy from hold at KeyBanc.
• InterActiveCorp (IACI) to buy from neutral at BofA/Merrill.
• KB Home (KBH) to neutral from sell at Goldman.
• News Corp. (NWSA) to neutral from underperform at Cowen.

KB Home (KBH) is ending the week on a high note, after the homebuilder comfortably surpassed Wall Street's fiscal fourth-quarter earnings expectations. Bright and early Friday morning, KBH announced quarterly net income of $17.4 million, or 23 cents per share, on revenue of $451 million. Adjusted housing gross margins improved to 19.7% from 19%.

This marks KBH's first quarterly profit, without the aid of tax gains, in almost four years. Analysts were anticipating KBH to swallow a deficit of 17 cents per share on revenue of $441.3 million, so these results definitely qualify as a positive surprise.

Southern Copper (SCCO) closed down 0.5%. Copper futures rose 0.61%, according to Bloomberg. Overall option implied volatility of 36 is near its 26-week average, according to Track Data, suggesting non-directional price movement.

KB Home (KBH) is expected to report Q4 EPS on Jan. 7. KBH January call option implied volatility is at 55, February is at 53, above its 26-week average of 51, according to Track Data, suggesting larger price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

"Home Prices Are About to Bottom" was the headline for the Barron's cover story the week of July 14, 2008. The story explained that the housing market should level off in many areas of the country by the end of the year.

I have made some equally unfortunate prognostications in my tenure at BloggingStocks, so my purpose is not to poke fun at Barron's but to point out that here we are, over two years later, and it is still debatable whether the housing market has bottomed out.

If you check out the stats at KB Home's (KBH) quote page, you'll notice that it's been doing poorly for a long time, until recently, when, over the last month, it decided to bounce strongly off the 52-week low of $9.43. Today, with about three hours to go before the end of the session, it is higher by almost 3.8% to $12.15 on the back of an earnings report.

Indeed, the chart shows what I'm talking about. And you have to wonder if the strength in the homebuilder will continue. There is one problem: although volume does stand a chance of ultimately going above the average, at the time of this writing, it isn't too impressive.

Analyst Upgrades

• Jefferies upgraded Computer Sciences (CSC) to buy from hold and raised its target to $53 from $47. The analyst said Computer Sciences' valuation has created one of the best LBO opportunities in several years and could provide a five year IRR of 25+%.
• Keefe Bruyette upgraded Comerica (CMA) to outperform from market perform, citing strength of the company's capital. The firm raised its target for shares to $44 from $43.
• RBC Capital upgraded Nokia (NOK) to outperform from sector perform and raised its price target to $14 from $12. The firm upgraded shares based on valuation, reduced execution risk on software development, and potential catalysts from new devices based on Symbian^3. RBS upgraded Nokia to buy from hold after the company named Stephen Elop as CEO.
• Allstate (ALL) was upgraded to buy from hold at Citigroup.
• Coca-Cola Enterprises (CCE) was upgraded to buy from neutral at BofA/Merrill.
• Moody's (MCO) was upgraded to overweight from neutral at Piper Jaffray.

KB Home (KBH - option chain) stock is trading lower today after the company announced second-quarter earnings this morning, posting a $30.7 million loss (40 cents per share) on revenue of $374 million. Analysts had forecast a loss of 30 cents per share on revenue of $373 million. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on KBH.

This morning, KBH opened at $11.90. So far today the stock has hit a high of $11.90 and a low of $11.19. As of 12:30, KBH is trading at $11.30, down $0.90 (-7.5%). The chart for KBH looks neutral and S&P gives KBH a neutral 3 STARS (out of 5) hold ranking.

Analyst Upgrades

• FBR Capital upgraded Halliburton (HAL) to outperform from market perform as it sees less headline risk from the Gulf of Mexico spill following Wednesday's House Energy and Commerce Committee hearing. The firm upped its target for shares to $44 from $35.
• FBR Capital also upgraded Morgan Stanley (MS) to outperform from market perform as it views the valuation as attractive following the recent pullback in shares. The firm maintains a $35 price target for shares.
• Deutsche Bank upgraded Avnet (AVT) to buy from hold on valuation; it views the recent pullback as a buying opportunity. The firm raised its target for shares to $39 from $36.
• U.S. Steel (X) was upgraded to conviction buy from buy at Goldman.
• News Corp. (NWS) was upgraded to buy from hold at Argus.
• Sprint (S) was upgraded to outperform from market perform at Raymond James.

Here are some highlights from this past week's earnings coverage on BloggingStocks:

• Adobe Systems Inc. (ADBE) reported that Q1 revenue was up but earnings declined sharply, and it offered guidance.
• Best Buy Inc. (BBY) shares rallied after it topped Q4 earnings expectations and offered encouraging guidance.
• Brinker International Inc. (EAT) raised its outlook for fiscal 2010 and also increased its quarterly dividend.
• China Automotive Systems Inc. (CAAS) reported that its revenue had doubled and it beat earnings expectations.
• ConAgra Foods Inc. (CAG) Q3 earnings matched estimates and revenue was flat, and it reaffirmed its outlook.
• Finish Line Inc. (FINL) shares rallied after it reported that Q4 earnings came in better than analysts' expected.

KB Home (KBH) reported first-quarter earnings Tuesday morning. The homebuilder said its loss came in at 71 cents per share. A year ago, KBH lost 75 cents per share. While the quarterly loss was less than last year's, it was larger than the Street's expected loss of 42 cents per share.

Quarterly revenue fell to $264 million from $307.4 million a year ago. Not only was revenue worse than a year ago, but it also missed expectations for revenue of $277 million.

It's time to get serious about home builders again, and today I started building a position in KB Home (KBH) using options. Since the collapse of the residential real estate market three years ago prognosticators have been debating when the home builders might be worthy of investing your precious coin of the realm.

As is to be expected in these volatile times most were either too optimistic or pessimistic and few got it right. Like many stocks the home builders appear to have bottomed last March. In the case of KB Home shares were available at $10. Today they have been trading between $17.64 and $18.00 per share, up 80%, although it has been a rocky road.

That is a very healthy return, but there is much more upside to come. How would you like to make 43% quick? Yeah me too!

It looks like John Paulson wants to get ahead of the crowd. He and other large homebuilders are buying prime building lots in states like Arizona, Colorado and Nevada.

The big players like Lennar Corp (LEN), Standard Pacific Corp. (SPF), KB Home (KBH), DR Horton (DHI) and Toll Brothers (TOL) are all grabbing lots at bargain basement prices.

Here are some highlights from this past week's earnings coverage on BloggingStocks:

• Aetna Inc. (AET) shares declined after the insurer issued a surprise earnings warning for 2010.
• Alcoa Inc. (AA) swung to a smaller-than-expected Q4 profit even as revenue declined, sending shares lower.
• Carter's Inc. (CRI) posted strong Q3 earnings that topped estimates and same-store sales growth.
• Chevron Corp. (CVX) shares declined slightly after the company issued a surprise earnings warning.
• Con-Way Inc. (CNW) was downgraded due in part to concerns about near-term earnings.