PepsiCo (NYSE: PEP) was upgraded to Buy from Hold at Deutsche Bank.
Fortress (NYSE: FIG) was upgraded at Citigroup to Hold from Sell.
Prudential (NYSE: PUK) was lifted to Overweight from Neutral at JP Morgan.
Keefe Bruyette upgraded Franklin Resources (NYSE: BEN) to Outperform from Market Perform and added shares to their Best Ideas List on valuation as they see an attractive risk/reward at current levels.
UBS upgraded ASML Holding (NASDAQ: ASML) to Buy from Neutral on valuation as they believe the company remains a market leader.
Oppenheimer raised Seattle Genetics (NASDAQ: SGEN) to Outperform from Perform on valuation following the recent weakness as they expect positive clinical news flow beginning in December.
Analyst downgrades:
UBS downgraded U.S. Steel (NYSE: X) to Sell from Buy and lowered its target to $30 from $60 citing deteriorating U.S. conditions and concerns about the company's high fixed costs in a falling steel price environment.
Royal Dutch Shell (NYSE: RDS.A) was downgraded to Underperform from Neutral at Credit Suisse.
China Unicom (NYSE: CHU) was lowered to Underweight from Neutral at JP Morgan.
Beyond the torment it has already caused in the Carribbean and the stress it places on those who are evacuating the Gulf Coast, hurricane Gustav will lead to higher prices at the pumps. That's because the majority of the Gulf of Mexico's oil production is shut down in anticipation of Gustav's force.
Exactly how much production is being shut down? CNNMoney reports that "energy producers have shut in approximately 77% of oil output and 37% of natural gas production in the Gulf of Mexico." This is affecting three producers particularly hard -- Royal Dutch Shell PLC (NYSE: RDS.A), BP PLC (NYSE: BP) and Chevron Corp. (NYSE: CVX).
And the production shut-down is significant -- "nearly 1 million barrels of daily oil production is now shut down. The last time this happened was in November 2005, after Hurricanes Katrina and Rita. In addition, 2.75 billion cubic feet of daily natural gas production is now shut down" according to CNNMoney.
Royal Dutch Shell (NYSE: RDS.A) closed at $85.07 Tuesday. Crude futures are down 1.88% to $126.43 according to Bloomberg.
RDS overall option implied volatility of 27 is near its 26-week average of 25 according to Track Data, suggesting non-directional fluctuations.
Alpha Natural (NYSE: ANR), an Appalachian coal producer with a market cap of $5.11 billion, closed at $72.73 Tuesday. Davenport & Company raised its rating to Buy with an $85 target price on May 27.
ANR overall option implied volatility of 65 is above its 26-week average of 58, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
According to people familiar with the matter, the Wall Street Journal reported that American International Group Inc's (NYSE: AIG) airplane-leasing unit is considering a split from the company. The people said International Lease Finance Corp have grown "increasingly concerned" the company will be hurt by AIG's financial troubles.
Royal Dutch Shell Plc (NYSE: RDS.A) and Spain's Repsol YPF SA (NYSE: REP) are pulling out of one of Iran's biggest gas projects, the $10B-plus development of phase 13 of South Pars, the world's largest gas field, the Financial Times reported.
WEB SITES:
Bloomberg reported that HSBC Holdings Plc (NYSE: HBC) set aside a smaller-than-forecast $3.2B for bad loans in the U.S. The bank also said its Q1 profit was higher than Q107.
BBC news reported Saturday that militants in Nigeria have again sabotaged oil transfer infrastructure belonging to Royal Dutch Shell (NYSE: RDS A). This is the fifth incident of such attacks in recent weeks. The BBC report states: "Several previous ones have been blamed on supporters of the militant leader Henry Okah, who is currently awaiting trial on treason charges."
A Shell Oil spokesperson is quoted as stating that multiple oil delivery lines are affected and that some amount of oil has spilled into the environment. The company is undertaking oil containment measures and production volume has been reduced. Reuters News Service reported: "...the rebel Movement for the Emancipation of the Niger Delta (MEND) ... has already knocked 164,000 barrels a day off Shell's production in Nigeria with a pipeline bombing last month."
According to Reuters, local security forces are reporting that not just oil delivery lines have been affected. They claim that three oil wells and other equipment were also subjected to damage. Additionally, this news of sabotage comes on the heels of an eight day Nigerian labor strike against Exxon Mobil Corp. (NYSE: XOM). That strike ended this past Thursday and had temporarily cut that company's Nigerian oil production in half. And of course, with oil supply problems and concerns, oil prices have increased.
Royal Dutch Shell (NYSE: RDS.A) closed at $76.39. Crude futures are up 0.45% to $117.21, according to Bloomberg. RDS over all option implied volatility of 23 is near its 26-week average of 25 according to Track Data, suggesting non-directional fluctuations.
MOST NOTEWORTHY: Auto & Truck Suppliers, Oplink Comm and The Wet Seal were today's noteworthy upgrades:
Baird upgraded the Auto & Truck Suppliers sector to Market Overweight from Market Weight citing valuations, lowered expectations, industry dynamics and a potential bottom in economic indicators. The firm upgraded Accuride Corp (NYSE: ACW) and Magna International (MGA) to Outperform from Neutral.
Merriman upgraded shares of Oplink Comm (NASDAQ: OPLK) to Neutral from Sell on valuation, as they believe Friday's sell-off fully reflects near-term operating concerns and that share price downside from here is limited.
Cowen raised The Wet Seal (NASDAQ: WTSLA) to Outperform from Neutral and has increased confidence that the new management's operational changes and cost cutting initiatives will lead to EPS upside.
OTHER UPGRADES:
BT Group (NYSE: BT) was raised to Equal Weight from Underweight at Morgan Stanley.
Societe Generale raised Royal Dutch Shell (NYSE: RDS.A) to Buy from Hold and ENI SpA (NYSE: E) to Hold from Sell.
Goldman raised Embarq (NYSE: EQ) to Neutral from Sell.
According to people familiar with the situation, the Wall Street Journal reported that Hurray! Holding Co Ltd (NASDAQ: HRAY) and Enlight Media have agreed to a merger valued at about $160M, that could be announced as early as Monday afternoon.
The Financial Times reported that anti-corruption investigators are probing payments by Chevron Corporation's (NYSE: CVX) ChevronTexaco and Royal Dutch Shell PLC (NYSE: RDS.A) to a company owned by powerful Nigerian politician James Ibori, whom they suspect has laundered tens of millions of dollars in British banks, cars and property.
The Financial Times also reported that Vodafone Group Plc (NYSE: VOD) is looking to increase its presence in China through a government-led restructuring of the country's telecommunications industry.
Royal Dutch Shell Plc's (NYSE: RDS.A) 16.67% stake in the Cossack Pioneer field of Australia's North West Shelf may be up for sale, according to the Wall Street Journal. The sale price is expected to be about $450M and may attract the likes of Cnooc Ltd (NYSE: CEO).
According to the Wall Street Journal's "Heard on the Street," subprime woes continue, and UBS AG (NYSE: UBS) may face a $7B-plus write-down in the fourth quarter and Citigroup Incorporated (NYSE: C) could face between $8B and $11B of write downs in the fourth quarter.
According to Barron's Online's "Weekday Trader" column, a General Electric Company (NYSE: GE) Asset Management bond fund, worth $5B, is suffering losses in its asset-backed mortgages and asset-backed securities, and is giving its investors the opportunity to redeem their holdings at 96c on the dollar.
According to executives familiar with the situation and reported by Apple Insider, the launch of the Apple Inc (NASDAQ: AAPL) iPhone in China is likely to be delayed due to a number of issues including revenue sharing and SIM card incompatibility.
Rising global demand for oil, combined with geological studies that predict that global oil production derived from conventional oil supplies will begin to decline late in this century, or as early as 2040, has led to a search for unconventional oil supplies.
Further, a large amount of that unconventional oil exists in the form of tar sands in Alberta, Canada, the bitumen of which is capable of producing 1.7 billion barrels of synthetic crude. Moreover, if just 10% of this field is actually recoverable, it would still represent the second largest oil reserve in the world.
But, as writer Elizabeth Kolbert outlined in an article on unconventional oil in this week's issue of The New Yorker magazine ("Unconventional Crude"), extracting that resource comes at a price: it's more expensive to extract -- about $1 of energy is needed to generate $3 of unconventional oil -- more CO2 is also released into the atmosphere than from conventional oil, and mines dug to secure the material scar the landscape, if not fully restored.
MOST NOTEWORTHY: Royal Dutch Shell, Citigroup, American Financial and Cognos were today's noteworthy downgrades:
Credit Suisse downgraded shares of Royal Dutch Shell (NYSE: RDS.A) to Neutral from Outperform based on valuation as analyst estimates now look about right, removing a potential catalyst.
Banc of America downgraded shares of Citigroup (NYSE: C) to Neutral from Buy and lowered their target to $39 from $45 given the eroding confidence in the company's earnings and book value.
American Financial (NYSE: AFR) was downgraded to Neutral from Buy at UBS and to Market Perform from Outperform at Friedman Billings following its acquisition by Gramercy Capital Corp (NYSE: GKK).
CIBC downgraded Cognos (NASDAQ: COGN) to Sector Performer from Outperformer based on takeover valuation premium and FX headwinds.
OTHER DOWNGRADES:
Goldman removed Microsoft (NASDAQ: MSFT) from its Conviction Buy List.
Morgan Stanley downgraded the hardlines and softlines retail sectors to Cautious from In Line; the firm also downgraded Bed Bath & Beyond (NASDAQ: BBBY) to Equal Weight from Overweight and Nordstrom (NYSE: JWN) to Underweight from Equal Weight.
MOST NOTEWORTHY: Centene, Brinker International, Harmonic, Idex and Royal Dutch Shell were today's noteworthy upgrades:
Jefferies upgraded shares of Centene Corporation (NYSE: CNC) to Buy from Hold as they expect the company is benefiting from above 20% revenue growth next year and SG&A leverage opportunity over the next 12–18 months.
Bear Stearns upgraded shares of Brinker International (NYSE: EAT) to Outperform from Peer Perform as they believe Brinker's turnaround efforts can enhance shareholder value.
Friedman Billings raised shares of Harmonic (NASDAQ: HLIT) to Outperform from Market Perform based on the favorable outlook for cable and satellite spending on HD video and other projects.
The firm also upgraded Idex Corporation (NYSE: IEX) to Outperform from Market Perform, citing the company's positive 2008 outlook and solid end markets.
CIBC upgraded J. Crew Group (NYSE: JCG) to Sector Outperformer from Sector Performer and Parker Hannifin (NYSE: PH) to Sector Performer from Sector Underperformer.
Barron's Online's (subscription required) "Weekday Trader" called Nucor Corporation (NYSE: NUE), a low-cost steel producer with a 4.7% dividend, a stock worthy of consideration.
The Financial Times (subscription required) reported that Renaissance Technologies and DE Shaw, two of the biggest quantitative hedge fund managers, are raising money, despite concerns over the poor performance of many computer-driven funds last month.
OTHER PAPERS:
According to the New York Times, Ventana Medical Systems Inc (NASDAQ: VMSI), which makes cancer diagnostic equipment, is expected to announce today that it will acquire Spring Bioscience for $28.9M in cash.
The New York Post reported that General Electric Company (NYSE: GE) CEO Jeffrey Immelt is planning on bringing Beth Comstock back as GE's chief marketing officer, according to sources close to Immelt.
MOST NOTEWORTHY: Kelly Services, Iron Mountain, Covenant Transportation and the biotech sector were today's noteworthy upgrades:
Merrill Lynch upgraded Kelly Services Inc (NASDAQ: KELYA) to Neutral from Sell and Iron Mountain Incorporated (NYSE: IRM) to Buy from Neutral after they adjusted estimates in the group to reflect risks of a recession in the U.S.
AG Edwards upgraded shares of Covenant Transportation Group (NASDAQ: CVTI) to Buy from Hold as they believe the stock is oversold after the company was able to renegotiate its debt covenants without significant cost increases.
Netflix Inc (NASDAQ: NFLX) was upgraded to Hold from Sell at Wedbush. The firm also upgraded shares of Kenexa Corporation (NASDAQ: KNXA) to Buy from Hold.
Home Depot Inc's (NYSE: HD) second quarter income drop of 15% may affect what will happen with the company's share buyback that is in part tied to the sale of its HD Supply wholesale business, reported the Wall Street Journal.
New Gap Inc (NYSE: GPS) CEO Glenn Murphy bought 150K shares of Gap stock for $2.3M Friday at an average price of $15.55, according to a Monday filing the SEC, reported Barron's Online's "Inside Scoop" column.
The Financial Times reported that share prices and currencies in the Asia-Pacific region tumbled earlier today, as investors worried about the subprime mess pulled back from emerging markets.
OTHER PAPERS:
Sony Corporation (NYSE: SNE) will announce plans to float its highly profitable financial services division, Sony Financial Holdings, in what could be Japan's biggest initial public offering this year, creating a company with a market value close to 1T yen, reported the U.K. Times.