Analyst Upgrades

• Exxon Mobil (XOM), Netflix (NFLX), Noble Corp. (NE), Pioneer Natural (PXD) and Noble Energy (NBL) to buy from neutral at Goldman.
• Cenovus Energy (CVE) to conviction buy from neutral and Atwood Oceanics (ATW) to neutral from sell at Goldman as well.
• Southern Company (SO) to buy from hold at Citigroup.
• Chevron (CVX) to buy from neutral at BofA/Merrill.
• Ryder (R), Entergy (ETR) and Seaspan (SSW) to buy from hold at Jefferies.
• Gerdau (GGB), Crown Castle (CCI) and American Tower (AMT) to buy from neutral at UBS.
• Aon (AON) and Willis Group (WSH) to buy from neutral at Janney Capital.
• Ryland Group (RYL) to buy from neutral at Ticonderoga.

Everybody has been wondering what was going to happen to homebuilders once the Federal government's tax credit expired at the end of April. Well, we're starting to find out, and the picture doesn't look good.

Goldman Sachs has downgraded the entire Homebuilders industry from Attractive to Neutral, dropped MDC Holdings Inc. (MDC) from its Conviction Buy List and dropped its price targets on 10 stocks in the industry.

And really, who can blame them?

We've seen new home sales plunge from 504K in April -- right before the tax credit expired -- to 300K in May. We've also watched housing starts and applications for new building permits dry up. Plus, it is getting harder and harder for individuals to qualify for a loan.

MOST NOTEWORTHY: Suntech Power, Premier Exhibitions and the Homebuilders Sector were today's noteworthy initiations:

• Citigroup named Suntech Power Holding (NYSE: STP) their top pick for China solar due to its leading scale and technology roadmap for higher cell efficiency, initiating shares with a Buy rating and $55 target.
  
• Merriman believes Premier Exhibitions (NASDAQ: PRXI) can move to the $14.50-$17.00 through the continued monetization of the company's current tours, the launching of additional tours and the value of the Titanic artifacts on hand. The firm started shares with a Buy rating.
  
• Lehman initiated D.R. Horton (NYSE: DHI), Ryland Group (NYSE: RYL), Toll Brothers (NYSE: TOL) with Overweight ratings and an $18 target, $31 target and $27 target; KB Home (NYSE: KBH) with an Equal Weight rating and $24 target; and Hovnanian Enterprises (NYSE: HOV) with an Underweight rating and $8 target.

OTHER INITIATIONS:

• Citigroup initiated Yingli Green Energy (NYSE: YGE) with a Hold rating and $24 target.
  
• UBS initiated Citrix Systems (NASDAQ: CTXS) with a Neutral rating and $38 target.
  
• JP Morgan initiated Biodel (NASDAQ: BIOD) with an Overweight rating.

TheStreet.com's Jim Cramer says until the public feels they won't lose money on a home, no problems will get solved.

Would you ever buy a house in this environment? That's really the ultimate question that has to be asked -- that the Fed should be asking -- if this junk is ever going to come back to life.

I know some of it is so short-term that the jury's back and the verdict is guilty, but most of it hinges on a simple issue: housing depreciation. If you think that your house is going to lose value, default on the second home lien. Which then, we know now, means defaulting on the ultimate mortgage.

The Fed can tinker with LIBOR (I still can't believe they wasted the banking system's time with the LIBOR/auction plan). It can issue statements that are a little more pro-growth than neutral.

Or it can try to change the psychology of the home buyer and homeowner.

A neighbor in my middle-class neighborhood of $200-$400,000 homes recently bought two adjacent houses and bridged them to create a 10,000-foot, $1+ million mansion. I thought he was nuts, until I read the New York Times article that suggests this is the best price point in today's market.

No one quibbles that selling a modestly-priced home in virtually any American market today is an exercise in despair. According to a report on NPR yesterday, the country is sitting on a one and a half year supply of new homes. And the numbers seem to be getting worse for some new home builders (see Eric Buscemi's post on the cancellation numbers at Ryland).

The ultra-expensive spreads, such as the $165 million Hearst estate Peter Cohan blogged about yesterday, are also struggling on the sales block. The 'tweeners, though, such as gentrified Boston homes, generous Manhattan flats, or Gold Coast condos, seem to be bucking the trend.

So maybe my neighbor has the right idea. Perhaps the multitude of house-flipping shows on cable television will be replaced with home mergers, turning two modest homes into one gargantuan (and sellable) property. If our society's income is stratifying, the new wealthy will need their estates, and the rest of us, our wattle huts.

The Ryland Group Inc (NYSE: RYL), the California-based homebuilder, released preliminary results last night. What continues to be most striking about homebuilder results is the magnitude of cancellations, suggesting either how widespread speculation was or how difficult it is for new homebuyers to get financing.

Cancellations were approximately 34 percent of gross orders for the quarter, compared to 35.9 percent in the second quarter 2006. Preliminary closings totaled 2,461 units in the period, compared to 3,803 units in the second quarter of 2006, a decline of 35.3 percent.

These are simply huge numbers. Add to this the shakeout that continues to unfold in the mortgage market as hedge fund and investment firms have to mark their portfolios to market for less liquid holdings, suggesting the housing and mortgage market still have a long way to go before the industry's problems are behind them.

MOST NOTEWORTHY: Genesit Energy LP (GEL), EnerNoc (ENOC) and Comcast (CMCSA) were today's noteworthy initiations:

• Genesis Energy (AMEX: GEL) was initiated with a Buy rating and $40 target at Stanford, as the firm believes the company's affiliation with Denbury Resources and pending acquisition of petroleum products, terminals, and transportation businesses from the Davison family will drive rapid growth.

• EnerNoc Inc (NASDAQ: ENOC) was initiated with a Hold rating and $42 target at Jefferies, due to valuation. EnerNoc was also initiated at Morgan Stanley with an Equal Weight rating and $40 target.

• Stifel expects Comcast (OTC: CMCSA) to benefit from higher penetration levels of DVR and HDTV set-top boxes over the next several years and initiated shares with a Buy rating and $34 target.

OTHER INITIATIONS:

• Select asset managers were initiated at Credit Suisse:

• AllianceBernstein (NYSE: AB), Affiliated Managers (NYSE: AMG), Fortress Investment (NYSE: FIG), Invesco (NYSE: IVZ), Franklin Resources (NYSE: BEN) and T Rowe Price (NASDAQ: TROW) were initiated with Outperform ratings.

• Blackrock (NYSE: BLK), Calamos Asset Mgmt (NADAQ: CLMS), Eaton Vance Corp (NYSE: EV), Federated Investors (NYSE: FII), Janus Capital (NYSE: JNS), Legg Mason Inc (NYSE: LM) and Waddell & Reed (NYSE: WDR) were initiated with Neutral ratings.

• Deutsche Bank initiated Ryland Group (NYSE: RYL) with a Buy rating and $52 target, as well as Pulte Homes (NYSE: PHM) and Meritage Homes Corp (NYSE: MTH) with Hold ratings and a $23 target and $29 target, respectively.

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

MOST NOTEWORTHY: Small-cap banks, Garmin Ltd (GRMN), Force Protection, Inc (FRPT), D.R. Horton, Inc (DHI) and Ryland Group, Inc (RYL) were today's noteworthy initiations:

• Stanford initiated shares of American Community Bancshares (NASDAQ: ACBA), BNC Bancorp (NASDAQ: BNCN), Cooperative Bankshares, Inc (NASDAQ: COOP) and Yadkin Valley Financial Corp (NASDAQ: YAVY) with Buy ratings. The firm started Capital Bank Corp (NASDAQ: CBKN) and Southern Community Financial Corp (NASDAQ: SCMF) with Hold ratings. Stanford believes North Carolina is a great opportunity for investors who look for inexpensive community banks operating in growing markets.
• Elsewhere, Garmin Ltd (NASDAQ: GRMN) was initiated with a Sector Outperformer at CIBC with a $67 target.
• Thomas Weisel started Force Protection Inc (NASDAQ: FRPT) with an Overweight rating, as the firm believes the mine-resistant vehicle market is real and has staying power.
• Morgan Stanley initiated both D.R. Horton, Inc (NYSE: DHI) and The Ryland Group, Inc (NYSE: RYL) with Equal Weight ratings.

OTHER INITIATIONS:

• Clearwire Corp (NASDAQ: CLWR) was the most favored initiation today, with coverage started in at least nine firms: Merril, ThinkEquity, Jefferies and Stifel all started Clearwire with a Buy rating, Morgan Stanley and JP Morgan started it with an Overweight rating, Raymond James and Wachovia started it with an Outperform rating and Bear Stearns started shares of Clearwire with a Peer Perform rating.
• Credit Suisse started Healthways, Inc (NASDAQ: HWAY) with an Outperform rating and $60 target.
• Wachovia started DCT Industrial Trust Inc (NYSE: DCT) with a Market Perform rating.
• Caris initiated Circuit City Stores, Inc (NYSE: CC) with an Average rating, as the firm believes Circuit City is still playing catch-up in the customer centered approach and services venues, and notes shares trade at premium earnings ratios to Best Buy Co, Inc (NYSE: BBY).

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

MOST NOTEWORTHY: Today's noteworthy upgrades include ConAgra Foods, Inc (CAG), Dell Inc (DELL), Ryland Group, Inc (RYL) and Volterra Semiconductor Corp (VLTR).

• Prudential upgraded shares of ConAgra Foods Inc (NYSE: CAG) to Neutral from Underweight with a $26 target on valuation.
• Pacific Crest upgraded shares of Dell Inc (NASDAQ: DELL) to Outperform from Sector Perform as the firm believes new management, new products and supply chain cost realignments could boost operating margins.
• Ryland Group, Inc (NYSE: RYL) was upgraded to Neutral from Underperform at Credit Suisse.
• Unterberg upgraded shares of Volterra Semiconductor (NASDAQ: VLTR) to Market Perform from Underperform on valuation.

OTHER UPGRADES:

• Friedman Billings upgraded Peabody Energy Corp (NYSE: BTU) to Outperform from Market Perform based on lack of CAPP exposure, growth profile, rising international demand and certain benefits from the scrubber trend.
• JP Morgan upgraded shares of Cincinnati Bell Inc (NYSE: CBB) to Overweight from Neutral, as the firm believes higher capex is reflected in the valuation and FCF should recover in 2008.
• Sandler upgraded First Charter Corp (NASDAQ: FCTR) to Buy from Hold based on valuation.
• Brean Murray has increased confidence in the success of Isle of Capri Casinos' (NASDAQ: ISLE) Isle casino, soon to open at Pompapno Park, and the considerable option value that should be embedded in shares related to a Florida gaming bill which would loosen restrictions on gaming at pari-mutual facilities. The firm upgraded shares to Buy from Hold on the news.
• Deutsche Bank upgraded shares of Pogo Producing Co (NYSE: PPP) to Hold from Sell to reflect the likelihood of corporate action over the near term, most likely the sale of the company in whole or in parts.
• Merill Lynch upgraded Janus Capital Group Inc (NYSE: JNS) and Calamos Asset Management, Inc (NASDAQ: CLMS) to Buy from Neutral.

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

The housing market's woes continue today as we get the numbers from last month's homes sales. According to a report from the Commerce Department sales of new homes fell 3.9% during the month of February.

February's disappointing results follow on the heels of January's 15.8% decline which was the largest one month drop in 13 years. With last month's decline the seasonally adjusted annual rate is now coming in at 848,000 which puts us on the slowest sales pace in the last 7 years.

Across the nation the only area that saw growth in new homes sales was the West, which saw sales numbers jump 24.6%, but this was following a devastating month of January which saw the same region decline by 25.8%. The average price of a new home nationwide is now running at $250,000 which is 0.3% below this time last year.

Following today's report home builders have been taking a pretty good hit on Wall Street:

• Ryland Group (NYSE: RYL) is currently trading down 1.5% to $45.41 down $0.71.
  
• Centex Corp (NYSE: CTX) is currently trading down 1.6% to $43.13 down $0.70.
  
• KB Home (NYSE: KBH) is currently trading down 1.9% to $45.98 down $0.88.
  
• Pulte Homes (NYSE: PHM) is currently trading down 1.9% to $27.04 down $0.52.
  

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.

MOST NOTEWORTHY: Under Armor Inc (NYSE: UA) and Cardinal Health Inc (NYSE: CAH) are today's most notable upgrades:

• Credit Suisse upgraded Under Armor Inc (NYSE: UA) to Outperform from Neutral with a $65 target and believes that the company is emerging as one of the premier global athletic brands.

• JMP Securities upgraded shares of Cardinal Health Inc (NYSE: CAH) to Outperform from Market Perform to reflect their expectation for accelerated earnings growth over the next three years.

OTHER UPGRADES:

• Friedman, Billings upgraded shares of Urban Outfitters Inc (NASDAQ: URBN) to Outperform from Market Perform to reflect positive momentum in URBN's core division, inventory control and easy upcoming comps.

• Stanford upgraded shares of Vonage Holdings (NYSE: VG) to Hold from Sell on valuation.

• Goldman Sachs upgraded the US Homebuilding Sector to Neutral from Sell saying the worst may be behind the group, but fundamentals remain troubling. The analyst said the next meaningful data will be from the Spring selling season, 6-8 weeks away.
• Goldman upgraded D.R. Horton Inc (NYSE: DHI), MDC Holdings Inc (NYSE: MDC) & Toll Brothers Inc (NYSE: TOL) to Buy from Neutral due to lower-risk at this point in the cycle. The Ryland Group Inc (NYSE: RYL) was upgraded to Neutral from Sell.

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