Analyst Upgrades

• Marriott (MAR) to outperform from market perform at Wells Fargo.
• Quest Diagnostics (DGX) and Owens-Illinois (OI) to outperform from neutral at Credit Suisse.
• FirstMerit (FMER) to outperform from perform at Oppenheimer.
• Safeway (SWY) to hold from sell at Citigroup.
• Babcock & Wilcox (BWC) to buy from neutral, as well as Jacobs Engineering (JEC) and W. R. Berkley (WRB) to neutral from sell, at Goldman.
• Pioneer Natural (PXD) to overweight from equal weight at Barclays.
• Teekay Tankers (TNK) to buy from underperform at BofA/Merrill.

Grocery store chain Safeway (SWY), first discussed here on February 20, 2009, at a price of $20.09, has retaken the key 50-day moving average, providing encouragement for investors who have been patient with the stock.

Intense competition will pressure grocery prices, hurting Safeway's revenue, but the view from here argues the worst is over concerning store traffic. In California, a major market for Safeway, the company's sales are likely to increase 2% to 3.5% in 2011. Further, Safeway should be able to pass along at least some food-cost inflation to consumers. Note: Any sustained economic retrenchment by the California market negates the above.

Kroger (KR) isn't far off from its 52-week high. The stock closed Friday at a price of $23.60; the top quote for the year is $24.14. The range has been tight for the shares: the 52-week low is $19.08. Earlier in the week, the supermarket concern posted earnings for the fourth quarter. How were the results?

They weren't bad. According to Reuters, Q4 profit on an adjusted basis came in at 46 cents per share. This turned out to be two pennies ahead of Wall Street's overall estimate. Even better, identical-store sales excluding the effect of fuel transactions increased 3.8%. I'm sure those who own Safeway (SWY) might be a little jealous on the latter count since their company experienced a decline in this metric.

Safeway (SWY) overall option implied volatility of 28 is near its 26-week average of 29, according to Track Data, suggesting nondirectional movement into its March 9 analyst meeting.

Nokia (NOK) volatility is near ten-month lows. Nokia April and July put option implied volatility is at 38, below its 26-week average of 44, according to Track Data, suggesting decreasing price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Safeway (SWY) finished Thursday's session down almost 2% to $21.62 after reporting fourth-quarter financial results. Trading volume was just under triple the 30-day average.

Safeway's bottom line came in at 62 cents per share, a number that was five pennies better than the overall projection, according to Reuters. We'll applaud that performance, but here's something that won't garner any accolades: same-store sales, without the effect of fuel transactions, went down 0.8%.

Barnes & Noble, the Gap, RadioShack, and Sears -- that may sound like the lineup at the local mall, but in fact they are just a few of the retailers scheduled to step into the earnings spotlight this week. Following last week's disappointing January retail sales numbers from the Commerce Department but strong fourth-quarter reports from Abercrombie & Fitch (ANF) and Nordstrom (JWN), the coming week will offer plenty more data on the sector for investors to mull over.

Walmart

Bentonville-based Walmart (WMT) offered free holiday shipping, closed its Moscow office and named a chief merchandising officer during its fourth quarter. Analysts surveyed by Thomson Reuters forecast earnings for that period to come to $1.31 per share, up from $1.17 in the same quarter of last year. The world's largest retailer also is expected to post revenues of $117.7 billion for the three months that ended in January. That's 3.5% more than a year earlier.

Medtronic (MDT) March option implied volatility is at 27, according to Track Data, near its six-month average into its expected release of Q3 EPS on February 22, suggesting nondirectional price movement.

Safeway (SWY) overall option implied volatility is at 31, according to Track Data, near its 26-week average of 29 into its expected release of Q4 EPS on February 24, suggesting slightly larger price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

The shares of grocery store chain Safeway Inc. (SWY), first discussed here on February 20, 2009, at a price of $20.09, have pulled backed toward $20 after testing $24 last autumn, but I still like the shares at this juncture. Here's why:

Intense competition will pressure grocery prices, hurting Safeway's revenue, but the view from here argues the worst is over concerning store traffic in California, a major market for SWY.

Meanwhile, margins should increase slightly in 2011, aided by an improved product mix.

Analyst Upgrades

• Polo Ralph Lauren (RL) to buy from hold at Citigroup.
• Qualcomm (QCOM) to buy from neutral at Roth Capital.
• Walgreen (WAG) to conviction buy from neutral at Goldman.
• Rockwell (ROK) to outperform from neutral at Credit Suisse.
• Carnival (CCL) to buy from hold at Deutsche Bank.
• SunTrust (STI) and TD Bank (TD) to outperform from market perform at Keefe Bruyette.
• Hawaiian Electric (HE) to outperform from neutral at RW Baird.
• Essex Property Trust (ESS) to outperform from neutral at Macquarie.
• Amgen (AMGN) to neutral from underperform at BofA/Merrill.

Analyst Upgrades

• Intel (INTC) was upgraded to buy from neutral at UBS.
• Wells Fargo upgraded MetroPCS (PCS), Coventry Health (CVH) and Scientific Games (SGMS) to outperform from market perform.
• Estee Lauder (EL) was upgraded to overweight from equal weight at Barclays.
• Simon Property (SPG) was upgraded to buy from hold at Jefferies.
• Citigroup upgraded BreitBurn Energy (BBEP) to buy from hold.

I first discussed Safeway Inc. (SWY), here on February 20, 2009, and shares of grocer have overcorrected with the Dow's recent pull-back, but the calculation is to stick with the trade.

Deflation price pressures in the dairy and produce categories and only a modest 1% increase in square footage have kept SWY's shares under pressure, and the sell/stop loss is not far away at $14.25.

Further, Safeway will need a substantial improvement in its California market, a key region for the company, moving forward. So far, the California recovery as been slower than expected.

Analyst Upgrades

• BofA/Merrill upgraded Eastman Chemical (EMN) to buy from neutral and raised its target to $82 from $80. The analyst upgraded shares based on valuation and expectations for strong earnings from fibers and performance chemicals.
• Bernstein upgraded Hershey (HSY) to market perform from underperform based on strong near-term category growth.
• Janney Montgomery upgraded Actuant (ATU) to buy from neutral with a $25 price target following the company's Q3 results.
• Infinera (INFN) was upgraded to buy from hold at Stifel Nicolaus.
• CTC Media (CTCM) was upgraded to buy from neutral at UBS.
• Williams (WMB) was upgraded to conviction buy from buy at Goldman.

Here are some highlights from this past week's earnings coverage on BloggingStocks:

• Berkshire Hathaway Inc. (BRK.A) announced improved results year over year, with book value up nearly 20%.
• BJ's Wholesale Club Inc. (BJ) Q4 earnings were in line with expectations but guidance for the year fell short.
• Cbeyond Inc. (CBEY) received an analyst's downgrade and lowered price target following its Q4 results.
• Costco Wholesale Corp. (COST) strong Q2 results fell short of analysts' estimates and shares declined.
• Dress Barn Inc. (DBRN) said it swung to a profit in Q2 and same-store sales increased, and it raised its outlook.