Temporary staffing agencies are usually a good leading economic indicator, somewhat like modern canaries in the proverbial mine shaft. When companies will not even staff with temporary workers, the short-term economic prospects look dim. Labor Ready Inc. (NYSE: LRW) is an industrial staffing temp agency specializing in general labor, light industrial labor and more skilled trades for construction, landscaping and transportation companies. The company last week released 3Q 2007 earnings that are not encouraging. Granted, some of its business such as landscaping personnel is seasonal, but the results indicate a weakening overall demand for semi-skilled labor in all sectors.

Despite a softening demand, revenue was up 4.4% to $390.7 million, but net income was down almost twice that, 8.5%, to $22.7 million. Revenue for 4Q 2007 is forecast to continue to decline by as much as $45 million. Labor Ready still operates 919 branches, having already closed 47 branches in 2007. Senior management blames decreased demand for temporary laborers on an increase in the minimum wage and continued weakness in both residential and commercial construction. As neither of these factors are within Labor Ready's control, the company can only downsize and control costs until demand for its services strengthens.

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Manpower (NYSE: MAN) volatility up; on employment growth concerns. MAN, an employment services company with 4,400 offices in 73 countries, is recently down $4.51 to $65.34. MAN has a market cap of $5.5 billion with long term debt of $800 million. MAN, Kelly Services (NASDAQ: KELYA), Labor ready (NYSE: LRW) & Spherion (NYSE: SFN) have aggressively sold off over the last week on U.S. human resource and employment services growth concerns. MAN September option implied volatility of 43 is above its 26-week average of 28 according to Track Data, suggesting larger price risk.

Labor Ready (NYSE: LRW) volatility Up; on employment growth concerns. LRW, a global temporary staffing provider, has a market cap of $878 million. LRW September option implied volatility of 47 is above its 26-week average of 40 according to Track Data, suggesting larger risk.

Volatility Index S&P 500 Options-VIX up 3.55 to 25; 10-day average is 22.95.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Reliable temporary help is essential to firms subject to seasonal variations or unexpected bursts of activity. A major source for assistance along that line in headquartered in Tacoma, Washington.

Labor Ready (NYSE: LRW) provides temporary employees for manual labor, light industrial, and skilled construction trades. The firm serves some 300,000 small and mid-sized businesses in the construction, warehousing, hospitality, landscaping, transportation, light manufacturing, retail, wholesale, facilities and sanitation industries. Labor Ready operates through 932 branches in the United States, Canada, Puerto Rico, and the United Kingdom.

The company surprised the Street last week, when it reported Q2 EPS of 41 cents and revenues of $351.1 million. Analysts had been looking for 35 cents and $340.7 million. Management also guided Q3 EPS to 48-50 cents (49 cent consensus), Q3 revenues to $390-$395 million ($384.27M consensus), FY07 EPS to $1.45-$1.48 ($1.39 consensus) and FY07 revenues to $1.39-$1.40 billion ($1.37B consensus). The stock popped on the news and has now entered the initial stage of a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "strong buy," one "buy," six "holds" and two "sells." Analysts see a 16% average annual growth rate, through the next five years. The LRW P/E ratio (18.43), PEG ratio (1.18), Price to Sales ratio (0.93), Price to Book ratio (4.34), Price to Cash Flow ratio (14.46), Price to Free Cash Flow ratio (14.40), Return on Assets (13.33%), Return on Investment (16.29%) and Return on Equity (22.97%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $15.45 and $28.63. A stop-loss of $23.40 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

MOST NOTEWORTHY: St. Jude Medical (STJ), Juniper Networks (JNPR), Satyam Computer (SAY), Clearwire (CLWR) and Citrix Systems (CTXS) were today's noteworthy upgrades:

• St. Jude Medical's (NYSE: STJ) upgrade to Outperform from Market Perform at Wachovia was based on signs of an ICD recovery and reasonable valuation.

• Baird upgraded shares of Juniper (NASDAQ: JNPR) to Outperform from Neutral following better-than-expected guidance; Goldman upgraded Juniper to Buy from Neutral.

• Satyam (NYSE: SAY) was upgraded to Positive from Neutral at Susquehanna citing better than expected growth.

• Clearwire (NASDAQ: CLWR) was upgraded to Outperform from Peer Perform at Bear Stearns following the announcement that Sprint (S) and Clearwire will form a Nationwide 4G/Wimax Network.

• Citrix (NASDAQ: CTXS) was upgraded at Jefferies to Buy from Hold as they believe the strong customer response to Presentation Server Platinum Edition and the pipeline buildup related to NetScaler 8.0 bode well for the second half of 2007...

OTHER UPGRADES:

• Lehman raised DSW Inc (NYSE: DSW) to Overweight from Equal-Weight.

• Goldman upgraded shares of Labor Ready (NYSE: LRW) to Neutral from Sell.

• Rodman upgraded shares of Encysive Pharma (NASDAQ: ENCY) to Market Perform from Underperform.

• Lazard upgraded Cubist Pharmaceuticals (NASDAQ: CBST) to Neutral from Sell.

• Selective Insurance (NASDAQ: SIGI) was upgraded at Fox Pitt to In Line from Underperform.

• Raymond James upgraded Pfizer (NYSE: PFE) to Strong Buy from Market Perform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

The difference between success and failure of a business venture sometimes depends on how quickly management can find reliable temporary help for specific projects. America's largest source for assistance along that line is headquartered in Tacoma, Washington.

Labor Ready (NYSE: LRW) provides temporary employees for manual labor, light industrial and skilled construction trades. The firm serves some 300,000 small and mid-sized businesses in the construction, warehousing, hospitality, landscaping, transportation, light manufacturing, retail, wholesale and sanitation industries. Labor Ready operates through 913 branches in the United States, Canada, Puerto Rico, and the United Kingdom.

The company surprised the Street last week, when it reported Q1 EPS of 21 cents and revenues of $290.2 million. Analysts had been looking for 16 cents and $281.3 million. Management also guided Q2 EPS to 33-35 cents (31 cent consensus), Q2 revenues to $337-$340 million ($327.19M consensus), FY07 EPS to $1.40-$1.45 ($1.24 consensus) and FY07 revenues to $1.35-$1.37 billion ($1.33B consensus). The board boosted its buyback authorization by $100 million. LRW shares popped through 30-day, 50-day and 90-day moving average resistance on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "strong buy," two "buys," six "holds" and two "sells." Analysts see a 17% annual growth rate, through the next five years. The LRW P/E ratio (14.84), PEG ratio (0.87), Price to Sales ratio (0.81), Price to Book ratio (3.10), Price to Cash Flow ratio (12.50), Price to Free Cash Flow ratio (11.50), Return on Assets (13.14%), Return on Investment (15.88%) and Return on Equity (21.81%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $14.94 and $27.75. A stop-loss of $18.75 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

MOST NOTEWORTHY: First Data Corp (FDC), Pinnacle Entertainment, Inc (PNK), Cephalon, Inc (CEPH) and Verint Systems Inc (VRNT) were some of today's downgrades:

• UBS downgraded First Data Corp (NYSE: FDC) to Neutral from Buy following the acquisition by KKR.

• Pinnacle Entertainment (NYSE: PNK) was cut to Hold from Buy at Matrix USA, as the firm believes post-hurricane reconstruction efforts are leading to significant capital expenditures, which limits upside.

• Cephalon Inc (NASDAQ: CEPH) was removed from American Technology's Focus List with shares up 15% in three weeks as the approval of Nuvigil without a Black Box warning has passed.

• JP Morgan cut shares of Verint Systems (NASDAQ: VRNT) to Underweight from Neutral, citing risks and costs associated from the Witness Systems' (WITS) acquisition.

OTHER DOWNGRADES:

• Labor Ready, Inc (NYSE: LRW) was downgraded to Sell from Neutral at Goldman based on the slowdown in U.S. residential construction activity.

• Citigroup downgraded International Paper Co (NYSE: IP) to Hold from Buy with a $39 target.

• Bernstein cut MedImmune, Inc (NASDAQ: MEDI) to Market Perform from Outperform.

• Sanders Morris downgraded Dreamworks Animation SKG, Inc (NYSE: DWA) to Neutral from Buy on valuation.

• JP Morgan downgraded Icagen, Inc (NASDAQ: ICGN) to Neutral from Overweight.

• Friedman Billings cut CompuDyne Corp (NASDAQ: CDCY) to Market Perform from Outperform following Q4 results.

• Roth Capital cut LivePerson, Inc (NASDAQ: LPSN) to Sell from Hold.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Research in Motion (RIMM) was the only notable company in today's list of initiations.

• Lazard initiated Research in Motion Ltd. (NASDAQ:RIMM) with a Hold based on valuation.

OTHER INITIATIONS:

• Morgan Stanley initiated Labor Ready Inc. (NYSE:LRW) with an Equal Weight rating and $18 target, expecting headwinds from the US "growth recession", which should continue next year.
• Calyon initiated Ameristar Casinos Inc. (NASDAQ:ASCA) with a Neutral rating citing valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).