Analyst Upgrades

• U.S. Steel (X) to buy from neutral and Barnes & Noble (BKS) to neutral from sell at Goldman.
• Salesforce.com (CRM) to buy from hold at Jefferies.
• Dollar Tree (DLTR) to overweight from equal weight at Barclays.
• Edison International (EIX) to hold from sell at Citigroup.
• Analog Devices (ADI) to overweight from neutral at JPMorgan.

Analyst Upgrades

• Valero Energy (VLO) to outperform from perform at Oppenheimer.
• Changyou.com (CYOU) to overweight from equal weight at Morgan Stanley.
• Albermarle (ALB) to overweight from neutral at JPMorgan.
• ICU Medical (ICUI) to buy from neutral at Roth Capital.
• Check Point (CHKP) to outperform from market perform at Bernstein.
• FMC Corporation (FMC) to buy from neutral at BofA/Merrill.
• Rangold Resources (GOLD) to neutral from sell at Goldman.
• Global Cash Access (GCA) to buy from hold at Duncan-Williams.

The Wall Street Journal reports (subscription required) that Altria Group Inc. (NYSE: MO) has agreed to acquire UST Inc. (NYSE: UST) for $10.3 billion in cash. According to the Journal, "The deal would give Altria a strong foothold in smokeless tobacco, a growing area of the market where it has had difficulty making inroads against long-established brands."

The deal diversifies Phillip Morris away from cigarettes -- a business that's declining by 3% or 4% -- and into the smokeless tobacco business that's increasing in the 6-7% range.

What is interesting about this deal is that it also acquires more of the potentially-disastrous legal liabilities that come with selling and aggressively marketing a product that causes people to die a slow and painful death -- Altria is apparently betting that the legal liabilities are already priced into UST stock. If they're right about that, it bodes well for the tobacco industry as a whole.

UST owns the Skoal, Copenhagen, Red Seal, and Husky smokeless tobacco brands, and also has interests in alcohol through its Ste. Michelle Wine Estates business.