MOST NOTEWORTHY: AeroVironment, American Oriental and Intel were today's noteworthy initiations:

• Suntrust initiated AeroVironment (NASDAQ: AVAV) with a Buy rating and $32 target and expects AVAV's market leadership in unmanned aerial systems and increased effort in the high altitude to drive strong organic growth.
• Jefferies believes American Oriental (NYSE: AOB) is capable of making sizable acquisitions given its strong cash position and finds the valuation attractive at current levels. The firm started shares with a Buy rating and $20 target.
• Intel (NASDAQ: INTC) was initiated with a Neutral rating and $30 target at Baird on valuation.

OTHER INITIATIONS:

• Equinix (NASDAQ: EQIX) was initiated with a Market Perform rating at Wachovia.
• Goldman started Quest Diagnostics (NASDAQ: DGX) with a Sell rating and $55 target, LabCorp (NASDAQ: LH) with a Neutral rating and $77 target and Pinnacle Entertainment (NASDAQ: PNK) with a Buy rating and $35 target.

Is it time to jump back into Quest Diagnostics (NYSE: DGX)?

Quest Diagnostics, which provides laboratory services to roughly 50% of the nation's doctors and hospitals, fell out of favor after it lost a large client, amid building price pressure.

Slowing growth, and an above-average sector valuation also were data points offered by those making the bearish case.

The bullish case, on the other hand, argues that Quest's recent cost cutting initiatives, strong cash flow, and growing demand for sophisticated medical tests (bolstered by that old standby, the aging Baby Boomer generation) suggest solid long-term growth prospects for DGX. Quest is trading around $55 with a P/E of 19.

(Note: Technical analysis agnostics stop reading here. All others, continue.)

From a technical analysis standpoint, Quest's chart appears to have formed a double-bottom around $47.90 in March/April and May/June.

Investment Category: Quest is a moderate-risk stock not suitable for low-risk investors. The Reuters 2007 and 2008 earnings per share consensus estimates for DGX are $2.87 and $3.25, respectively.

Diagnostic medical tests guide physicians through the process of diagnosing diseases and measuring the progress of recovery. The leading U. S. provider of diagnostic testing services is a Lyndhurst, New Jersey outfit that performs personal health testing on more than 150 million patients a year. It was the first laboratory in the country to achieve ISO 9001 certification.

Quest Diagnostics (NYSE: DGX) provides diagnostic testing services to the healthcare industry. Offerings include routine blood tests, pap tests, urinalyses, pregnancy tests, asthma and allergy tests, gene-based tests and tests for drugs of abuse. It also provides anatomic pathology services, testing for clinical trials, and risk assessment services for the life insurance industry. Through its Nichols Institute Diagnostics subsidiary, the firm manufactures and markets diagnostic test kits and systems to hospitals, clinical laboratories and dialysis centers. Quest operates more than 2,000 sample collection centers, 30 primary labs and 150 rapid response labs throughout the US and in Mexico and the UK. The firm has testing contracts with such health insurers as Aetna (NYSE: AET) and Cigna (NYSE: CI).

The company surprised the Street earlier in the week, when it reported Q2 EPS of 73 cents and revenues of $1.64 billion. Analysts had been looking for 68 cents and $1.61 billion. Management also guided FY07 EPS to $2.80-2.95 ($2.80 consensus) and FY07 revenues to $6.6-6.7 billion ($6.61B consensus).

It may be Independence Day week, but it appears that there are a number of companies willing to sell their independence to the highest bidder.

• XM SATELLITE RADIO HOLDINGS INC (NASDAQ: XMSR)

Word is that there's more than one bid out for the satellite radio company. We know about the merger agreement with Sirius Satellite Radio Inc's (NASDAQ: SIRI), so who's the other party? Or, is there another party? Some are convinced it's just talk. No names are even floating around. But for XM to walk away from Sirius would cost them a $175M break-up fee. They'd have to really be serious about another offer to do that.


• BUILDING MATERIALS HOLDING CORPORATION (NYSE: BLG)

In May, Robert L .Chapman of Chapman Capital, the "activist investor", said Building Materials Holding Corp. should consider selling all or parts of itself. Then he upped his stake to 8.1% in the residential construction services provider. Now comes word that the company may have hired, or be in the process of hiring, a strategic advisor.

MOST NOTEWORTHY: The semiconductor sector, Quest Diagnostics (NYSE: DGX) and Federal National Mortgage Association (NYSE: FNM) were today's noteworthy upgrades:

• Bernstein upgraded the semiconductor sector to Overweight form Market Weight on expectations that utilization will rise starting in Q2. The firm upgraded ASML Holding NV (NASDAQ: ASML) to Outperform from Market Perform and Infineon Technologies (NYSE: IFX) to Market Perform from Underperform.
• UBS upgraded Quest Diagnostics to Buy from Neutral, citing Laboratory Corporation Of America Holdings' (NYSE: LH) contract renewal with Cigna HealthCare, which should ease concerns regarding deteriorating pricing.
• Fannie Mae was upgraded to Outperform from Market Perform at Friedman Billings, citing improving fundamentals, better business mix and the possibility the company reports current financials in the next 12-18 months.

OTHER UPGRADES:

• Mediacom Communications Corporation (NASDAQ: MCCC) was upgraded to Neutral at Pali Capital, as the firm does not see a major catalyst to drive down shares.
• Soleil upgraded shares of ICU Medical Inc (NASDAQ: ICUI) to Buy from Hold.
• DynCorp International Inc (NYSE: DCP) was upgraded to Outperformer from Sector Performer at CIBC World Markets.
• CIBC also upgraded shares of Radware Limited (NASDAQ: RDWR) to Outperformer from Sector Performer.

Jim Cramer reviewed a last Fallen Angel on CNBC's MAD MONEY tonight: Quest Diagnostics (NYSE:DGX). He owns it in his trust, for disclosure. He said that Quest losing Oxford's business (UnitedHealth Group NYSE:UNH) took the stock down under $49. The company had already announced the news a month earlier. He isn't minimizing the business loss, or so he says, because it was $400 million of their $6 billion in total business. The company beat last week by $0.05 on EPS, but lowered guidance. He said it traded up $1.00 because the street is assuming it is conservative. He thinks it could earn $3.10 and they are low-balling estimates at $2.95. It closed at $52.25 and is now up at $52.90 in after-hours. J.P.Morgan just raised it and a broker luncheon on it last week was over-attended.

Cramer interviewed the CEO of Jones Soda (NASDAQ:JSDA), Peter van Stolk, before closing down MAD MONEY until tomorrow. It lost Target business, but he said that is only 2% of their business. The company doesn't use high-fructose corn syrup, they use cane sugar. Cramer doesn't think it has finished rising. The company won't be announcing any new product data until the first week of March. Cramer said it was up $1.00, but he said let it pull-back and then you can buy it since it was up so much today. This after-hours pop before it came in is another yearly high, and the company had a $376 million market cap as of the close. This stock, if it meets the $0.14 estimate in 2007 without beating estimates, then it now trades at 100-times December 2007 fiscal EPS projections. He's been behind this one before (back on December 21 he called the next Hansen Natural [NASDAQ:HANS]), on more than one occasion.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own securities in the companies he covers.

MOST NOTEWORTHY: The Kroger Co (KR) and Quest Diagnostics Inc (DGX) were today's most notable upgrades:

• Bank of America upgraded The Kroger Co (NYSE: KR) to Buy from Sell with a $29 target. Due to streamlined distribution and reduced SG&A expenses having closed the productivity gap with Wal-Mart Corp (NYSE: WMT), the firm believes Kroger is well positioned to accelerate growth and modestly increase operating margins.

• JP Morgan upgraded shares of Quest Diagnostics Inc (NYSE: DGX) to Overweight from Neutral as they not only believe the company's results will outperform expectations over the next few quarters, but that management will become more aggressive in the acquisitions market.

OTHER UPGRADES:

• Sterne Agee upgraded Coast Financial Holdings Inc (NASDAQ: CFHI) to Hold from Sell, with an $8.50 target.

• Goldman Sachs upgraded shares of Nova Chemical Corp (NYSE: NCX) to Neutral from Sell, with a $12 target, citing the potential sale of Nova's styrene business.

• Citing the possibility of a merger with Abitibi-Consolidated Inc (NYSE: ABY), Bowater Inc (NYSE: BOW) was upgraded to Neutral from Sell at Bank of America and to Buy from Hold at Soliel Securities.

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