Merrill upgraded Kraft Foods (NYSE: KFT) to Buy from Neutral citing progress in the company's turnaround plan, execution, and 2009 earnings growth.
Thomas Weisel raised Express Scripts (NASDAQ: ESRX) to Overweight from Market Weight and believes the company's core business remains strong and that valuation is attractive.
Friedman Billings upgraded shares of Symantec (NASDAQ: SYMC) to Outperform from Market Perform on valuation after checks indicated the company should meet Q2 expectations.
NeuStar (NSR) was upgraded to Outperform from Neutral at Baird.
Friedman Billings downgraded shares of Zions Bancorp (NASDAQ: ZION) to Market Perform from Outperform and lowered its target to $33 from $43 following the company's Q3 results, as they believe near-term credit trends and concerns surrounding its securities portfolio will limit upside. Shares were also downgraded at JP Morgan to Neutral from Overweight due to deteriorating credit trends.
Banc of America cut Monster (NASDAQ: MNST) to Neutral from Buy to reflect a lack of margin stability and their belief consensus estimates remain too high.
Barclays downgraded Avis Budget Group (NYSE: CAR) to Equal Weight from Overweight citing the global economic slowdown and refinancing risk.
Luxottica was also downgraded at HSBC to Neutral from Overweight.
JP Morgan cut AuthenTec (NASDAQ: AUTH) to Underweight from Neutral.
Analyst initiations:
Janney Montgomery believes Gladstone Capital's (NASDAQ: GLAD) management team and lower portfolio investment risk profile warrant a premium valuation. The firm started shares with a Buy rating and $13 target.
CommVault (NASDAQ: CVLT) was initiated with a Buy rating and $14 target at Cantor, as the firm finds the stock attractively valued given its secular growth rate potential.
KeyBanc is positive on Papa John's (NASDAQ: PZZA) management team, growth potential, cost initiatives, and differentiation. Shares were assumed with a Buy rating and $30 target.
Arris (NASDAQ: ARRS) was initiated at Jefferies with a Hold rating and $7 target.
Rigel Pharmaceuticals (NASDAQ: RIGL) was initiated at Banc of America with a Neutral rating and $21 target.
Morgan Stanley started Hansen Natural (NASDAQ: HANS) with an Equal Weight rating.
MOST NOTEWORTHY: Overseas Shipholding, Tenet Healthcare and Luxottica were today's noteworthy upgrades:
Bear upgraded Overseas Shipholding Group (NYSE: OSG) to Outperform from Peer Perform following its Q4 results, citing seasonal strength.
Tenet Healthcare (NYSE: THC) was upgraded to Hold from Underperform at Jefferies after quarterly operating trends showed signs of stabilization.
Goldman raised Luxottica Group (NYSE: LUX) to Buy from Neutral and added shares to their Conviction Buy List as they find the valuation attractive at current levels.
OTHER UPGRADES:
UBS raised Telefonica (NYSE: TEF) to Buy from Neutral.
MOST NOTEWORTHY: Entertainment software stocks, Luxottica and Hansen Medical were today's noteworthy initiations:
Citigroup initiated Electronic Arts (NASDAQ: ERTS) and Activision (NASDAQ: ATVI) with Buy ratings and targets of $75 and $29, respectively; the firm initiated Take-Two (NASDAQ: TTWO) and THQ Inc (NASDAQ: THQI) with Hold ratings and targets of $23 and $34, respectively.
Citigroup also started shares of Luxottica Group (NYSE: LUX) with a Buy rating. The firm believes the company can maintain its dominant market position given its house brands portfolio and early expansion into emerging markets.
Merriman started shares of Hansen Medical (NASDAQ: HNSN) with a Buy rating and thinks the company's Sensei System could radically change the landscape of catheter based surgery. The firm believes the stock can trade to the $34-$41 range in 12-18 months.
MOST NOTEWORTHY: The ethanol sector, BT Group, AMR Corp and Kyphon were today's noteworthy downgrades:
Friedman Billings downgraded Aventine Renewable Energy (NYSE: AVR) and Pacific Ethanol Inc (NASDAQ: PEIX) to Underperform and VeraSun Energy Corporation (NYSE: VSE) was downgraded to Market Perform from Outperform. The firm said the ethanol market has become increasingly challenging as spot market prices have declined by 30% in the past few months and expect pressure to remain through 2008 as the industry's growing pains continue.
Morgan Stanley downgraded shares of BT Group (NYSE: BT) to Underweight from Equal Weight on valuation and regulation uncertainty ahead of Ofcom's first consultation document next week.
AMR Corporation (NYSE: AMR) was downgraded to Sell from Neutral at Goldman to reflect the company's U.S. exposure as they expect the U.S. economy to slow.
Banc of America downgraded shares of Kyphon Inc (NASDAQ: KYPH) to Neutral from Buy on valuation as the spread on the acquisition by Medtronic Inc (NYSE: MDT) has now narrowed.
Luxury eyewear manufacturer and distributor Luxottica Group (NYSE: LUX) certainly has turned its eye towards profits. Despite the continuing erosion of the U.S. dollar against the Euro, Luxottica's July 26 2Q earnings report looks good. The only blind spot is Luxottica's inability to capitalize on its retail sector, particularly in the U.S. market. That is not to say Luxottica is not trying. The company has recently acquired 870 additional retail locations globally, and is aggressively establishing a retail presence in China and South Africa. In order to strengthen its brands in the U.S., Luxottica is unveiling a new line of eyewear products under a licensing agreement with Polo Ralph Lauren. Within the next several quarters, Luxottica intends to launch an ultra-luxury (obscenely overpriced?) eyewear brand named ILORI as part of a full luxury line. Perhaps the problem in its retail sector stems from Luxottica's inability to define precisely what type of eyewear distributor it is. While going after the vanity eyewear market of the uber-wealthy, Luxottica also owns LensCrafters and Sunglass Hut, the epitome of value-driven suburban mall retail demographics.
Despite problems in its retail sector, and being repreatedly hammered by exchange rate fluctuations, Luxottica continues to post good numbers. The company posted its ninth consecutive quarter of double-digit growth in its wholesale sector. In the most recent quarter, wholesale sales were up 17.5%. This gain follows 1Q 2007 wholesale gains of 20.4%. For the first half of 2007, wholesale sector operating income has increased 24.5%, which certainly helps to offset a 12% decline in retail operating income for the same period. Wholesale sales in emerging markets have increased by 50% during the previous quarter with so sign of a slowdown. On the basis of recent wholesale figures, Luxottica CEO Andrea Guerra raised FY guidance for growth in consolidated EPS to the 26-29% range, excluding the impact of exchange rate fluctuations, always a major concern to potential and current shareholders. For the first half of 2007, consolidated EPS stands at $0.83.
Luxottica stock is up over 15% from the beginning of the year, closing on 9 August at $35.50. Investors with a tolerance for currency volatility may wish to look into Luxottica.
MOST NOTEWORTHY: CheckFree (CKFR), Talbots (TLB), SPSS Inc (SPSS), Network Appliance (NTAP) and Pozen Inc (POZN) were today's noteworthy downgrades:
Following FiServ's (NASDAQ: FISV) acquisition of CheckFree, Raymond James cut CKFR shares to Market Perform from Strong Buy and Baird downgraded shares to Neutral from Outperform.
Talbots (NYSE: TLB) was cut to Sell from Hold at Citigroup based on valuation, continued earnings disappointments, and a lack of earnings visibility.
Cowen downgraded shares of SPSS Inc (NASDAQ: SPSS) to Underperform from Neutral citing decelerating growth and poor earnings quality.
Bear Stearns cut Network Appliance (NASDAQ: NTAP) to Underperform from Peer Perform on the negative Q1 pre-announcement. Pacific Crest downgraded shares to Sector Perform from Outperform.
After Pozen (NASDAQ: POZN) received a second approvable letter for Trexima, shares were downgraded by three firms:
To Neutral from Strong Buy at First Albany
To Hold from Buy at Jefferies and Lazard...
OTHER DOWNGRADES:
Oppenheimer downgraded Applebee's (NASDAQ: APPB) to Neutral from Buy.
Gabelli downgraded Boston Beer (NYSE: SAM) to Hold from Buy.
Lehman downgraded Luxottica (NYSE: LUX) and Clorox (NYSE: CLX) to Equal Weight from Overweight.
Thomas Weisel downgraded Nortel Networks (NYSE: NT) to Market Weight from Overweight.
The biggest eyewear firm in the world makes thousands of house brand and designer frames in Italy and China and sells them around the globe. Know who it is? Read on.
Luxottica Group (NYSE: LUX) designs, manufactures, distributes and markets prescription eyeglass frames and sunglasses. The Manufacturing and Wholesale Distribution segment makes house brands, such as Ray-Ban, Persol and Vogue. It also provides designer lines, such as Chanel, Prada and Versace. The Retail Distribution segment runs a network of some 5,800 outlets, selling frames, sunglasses, watches and accessories. The stores are distributed throughout North America, Asia and Europe. The firm operates LensCrafters and Pearl Vision, the two leading North American retail optical chains, and Sunglass Hut, the leading North American sun specialty retailer.
Luxottica already has the Prada and Ray-Ban brands under its umbrella, so adding OO, which offers an upscale line of high-performance sunglasses and goggles, seems like a shrewd and sensible move. It seems as though the collective's primary "competition" these days is the man on the street ... quite literally!
Oakley is one of those brands, like Prada - or Coach (NYSE: COH) - of which poorly fashioned knock-offs are easily found lining the street corners of major cities. A little haggling, some sweet talking, and the right amount of cash can outfit a New York City or Las Vegas tourist with the cream of the fraudulent crop.
My husband's stepfather was once given a pair of Oakley sunglasses, which he thought to be genuine product until closely examining the "brand" name that read... O4kely. Whoops. You get what you pay for, and eyeglasses are more fragile - and more vital - than handbags, so those looking for quality will continue to pay for it. And in my experience (and my stepfather-in-law's), once you've had one knock-off, you're not likely to continue the ruse. The combined cache of these brands should make Luxottica quite the name to be reckoned with in the trendy eyewear industry.
This morning, the world's largest eyewear maker, Luxottica Group SpA (NYSE: LUX), announced it would acquire U.S. sunglasses maker Oakley Inc (NYSE: OO) in an all-cash deal for around $2.1 billion, or $29.30 per share.
In what could be a "win-win situation for both companies," in the words of analysts at Morgan Keegan, Luxottica said the combination could offer an opportunity to create new eyewear categories and "enhanced economies of scale." Indeed, an Oakley acquisition should complement Luxottica, which owns the RayBan, Chanel, Prada and Versace lines, and help it transition into the sporting goods sector. Conversely, Oakley, which has been cutting back on its other lines that include footwear and apparel to focus more on its eyewear offerings, should fit Luxottica like a glove.
UBS analyst Laura Leonardelli believes an acquisition of Oakley would increase Lux's sales by around 12% in 2008. Additionally, it would allow Luxottica to further solidify its presence in the U.S. and other markets.
After the announcement, shares of Oakley were up 12% and Luxottica traded around 8% higher, signalling that investors agreed this was a good deal for all involved. The deal has been approved by both company boards and is expected to be finalized in the second half of 2007.
Oakley (NYSE: OO) volatility and volume elevated prior to anticipated LUX deal. Luxottica Group SpA (NYSE: LUX), the world's largest manufacturer of eyewear, agreed to buy OO for $2.03 billion. I reported uncharacteristic OO activity on 5/31/07 and 6/6/07. OO option volume was heavy on 6/20/07. OO July option implied volatility of 43 was above its 26-week average of 35 according to Track Data, suggesting larger price fluctuations.
Morningstar (NASDAQ: MORN) option implied volatility Stable. MORN, a provider of independent investment research, closed at $47.57. MORN's 2007 Morningstar Investment Conference will feature leading mutual fund managers and industry leaders-discussing current topics and industry issues beginning June 27th in Chicago. MORN over all option implied volatility of 30 is near its 26-week average according to Track Data, suggesting standard deviation price risks.
Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.
Stock futures indicate a flat to lower open today for U.S. stocks after they tumbled yesterday following another bond market decline.
Yesterday, the Dow industrials and the S&P 500 were down more than 1% as bond yields rose again with yield on the benchmark 10-year note climbing to 5.13% and ahead of economic data released today.
This morning, bonds fell again as the yield on the benchmark 10-year note rose to 5.16%. Today, several economic indicators are due. At 8:30 am, weekly numbers on jobless claims will be released. At 10:00 am, the Conference Board's May index of leading economic indicators is due and at 12:00 pm, the Philadelphia Federal Reserve will release its June index of regional manufacturing activity, which is expected to show a significant increase.
Overseas, Japanese stocks rose to a seven-year high Thursday. The weakness in the yen that can help Japanese exporters, as well as general positive economic outlook lifted the Nikkei 225 for a sixth day. While Hong Kong and other Asian markets continued to set new records, others showed some weakness. European stocks, on the other hand, followed the U.S. and fell the most in two weeks as rising bond yields in the U.S. and Europe pushed banks, insurers and retailers lower.
Corporate news:
Dow Jones & Co. (NYSE: DJ) said yesterday that its board would take over discussions from the Bancroft family, the company's controlling shareholders, about a potential acquisition by News Corp. (NYSE: NWS).
Merrill Lynch & Co. (NYSE: MER) launched an auction of assets from the two hedge funds that Bear Stearns Cos. (NYSE: BSC) controls that invested in subprime mortgages backed securities.
Luxottica Group SpA (NYSE: LUX) agreed to buy Oakley Inc. (NYSE: OO) for $2.03 billion to add sports sunglasses to the Italian company's Ray-Ban and Ralph Lauren brands. Oakley's shareholders will receive $29.30 a share, 16% above yesterday's closing price
The much awaited IPO of private equity firm Blackstone Group worth up to $4.75 billion has arrived. With a BX ticker, shares will begin trading on the NYSE Friday after being priced later today. Apparently the IPO was about seven times subscribed, boosted by high non-U.S. demand according to the Financial Times. U.S. mutual fund interest was limited by concern over a possible increase in Blackstone's tax liability. It is expected that some 133.3 million common units will be sold at $29 to $31 each.
Amazing. Amazon.com Inc (NASDAQ: AMZN), that big online retailer, sees the flix for the net. The shares keep rising for the online DVD rental company-up about 15%, highest since January-- even if their discs do come a little scratched. More than that though is while new subscribers are coming on; it's not exactly going gangbusters. Still, 6.8M is a whole lot of subscribers. Will Amazon, or someone else, overpay?
Which came first: The ongoing takeover rumors or the higher stock price? Or was it that Dell Inc (NASDAQ: DELL) is said to be after Rackable, a provider of servers and storage products for high density data center deployments. Rack it up.
Word is that this real estate investment trust will look for a sale, combo or merger. They said the venerable firm of Friedman, Billings, Ramsey & Co. will help them "explore strategic alternatives." Then the stock went up.
Dennis Gomes, whose name surfaced in March, is a one time gaming exec and regulator. He's signed a confidentiality agreement to have a look see at the firm's Atlantic City casinos. Separately, Las Vegas' Boyd Gaming Corporation (NYSE: BYD) has also been mentioned as a possible contender.
The CEO of this Kansas-based transportation service provider has been quoted as saying that a takeover is possible. An LBO is likely. This week the shares have actively been trading up.
Netflix Inc. (NASDAQ: NFLX) -- call volume aggressive on takeover speculation. NFLX, a provider of DVD movie rentals, is recently up $0.34 to $21.70. NFLX was frequently mentioned as an M&A candidate in 2006. NFLX call option volume of 10,988 contracts compares to put volume of 290 contracts. NFLX June 22.5 calls are bid .55 cents above its theoretical value of .26 cents. NFLX July option implied volatility of 38 is near its 26-week average according to Track Data, suggesting non-directional price risk.
Oakley Inc. (NYSE: OO) -- volatility suggests catalysts as OO trades near 68-month high. OO is recently at $25.01. Morgan Keegan says: "Last week an Italian daily, la Repubblica, reported Luxottica Group (NYSE: LUX) could acquire OO. Last night, OO amended its 1Q:04 severance agreement accelerating vesting on a change in control. Further, covered employees will now be paid out 100% of the pro rated amount rather than 50%. This is usually a tell-tale sign that a company is at least exploring a sale. We point out Jim Jannard owns 64.1% of the share outstanding." OO July option implied volatility of 37 is above its 26-week average of 33 according to Track Data, suggesting non-directional price fluctuations.
It's unusual for a product to offer high performance, high fashion and safety, all at once. There is an eyewear outfit in Foothill Ranch, California that manages the trifecta.
Oakley, Inc. (NYSE: OO) makes high-performance goggles and sunglasses for the sports and fashion sunglasses markets. The firm's brand portfolio includes the Dragon, Eye Safety Systems, Fox Racing, Mosley Tribes, Oliver Peoples, and Paul Smith Spectacles lines. Beyond its wholesale operations, Oakley operates about 220 of its own retail shops, including Oakley Stores, The Optical Shop of Aspen, and Sunglass Icon. The company also offers a wide selection of Oakley-branded apparel, footwear, watches and accessories. Competitors include Luxottica Group (NYSE: LUX) and Nike (NYSE: NKE).
Oakley pleased investors earlier in the month, when it reported Q1 EPS of eight cents and revenues of $199.2 million. Analysts had been looking for three cents and $182.7 million. Management also guided FY07 EPS to 95-98 cents, versus Street consensus of 96 cents. The CEO attributed the good quarter to growth of its retail endeavor, contributions from acquisitions and the successful implementation of process changes that allowed earlier shipment of the spring 2007 product. The stock popped on the news and then passed into a bullish "flag" consolidation pattern. Stocks 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 issue with one "strong buy," one "buy" and eight "holds." Analysts see a 19% growth rate, through the next year. The OO Price to Sales ratio (2.09), Sales Growth rate (31.29%) and EPS Growth rate (100.00%) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 36% of the outstanding shares. Over the past 52 weeks, the stock has traded between $14.86 and $25.50. A stop-loss of $21.25 looks good here.
In unrelenting pursuit of double digit EPS growth for fiscal year 2007, it was announced Friday March 23, that Luxottica Group (NYSE:LUX) had acquired two South African eye wear chains. The reported total expenditure for the dual purchases was $13.4 million. Luxottica says the acquisition fits snugly into the company's strategy of maintaining market dominance, increasing cash flow generation and staying ahead of the eye wear industry growth curve.
Andrea Guerra, Luxottica Group's chief executive officer said that nearly two thirds of the world's population is just beginning to explore the fashion eye wear market. The drivers in the market can be divided into: 1) People attempting to express individuality through choices made in fashion eye wear has never been stronger. 2) As people in emerging economies come to realize the simplicity of vision enhancement through eye wear, they are also coming to grasp the realities of personal expression that fashion eye wear choices can make. 3) As baby-boomers age, there is an ever increasing pool of new clients who are visiting fashion eye wear stores for the very first time.
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Analyst upgrades:
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Eric Buscemi reported some "shady" news from the world of fashion earlier today, as Italian company 
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Oakley
Stock futures indicate a flat to lower open today for U.S. stocks after they tumbled yesterday following another bond market decline. 
Analysts had been looking for three cents and $182.7 million. Management also guided FY07 EPS to 95-98 cents, versus Street consensus of 96 cents. The CEO attributed the good quarter to growth of its retail endeavor, contributions from acquisitions and the successful implementation of process changes that allowed earlier shipment of the spring 2007 product. The stock popped on the news and then passed into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
