Dell (NASDAQ: DELL) will commence an offer to acquire Perot Systems (NYSE: PER) for $30 per share in cash. DELL expects the transaction to be accretive to DELL's GAAP earnings in its fiscal year 2012. PER options were active last week, with 2,549 contracts trading on September 18, the most active day since July 2002. PER over all option implied volatility of 48 is above its 26-week average of 36, according to Track Data, suggesting larger price movement.

Sara Lee (NYSE: SLE) closed at $10.68. SLE October option implied volatility of 34 is near its 26-week average of 36. SLE options were active on September 18 with 17,563 contracts trading according to Track Data.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Here are some highlights from last week's earnings coverage from BloggingStocks:

• Applied Materials Inc. (NASDAQ: AMAT) posted better-than-expected Q3 results, sending shares higher.
• AutoDesk Inc. (NASDAQ: ADSK) reported better-than-expected Q2 earnings, sending shares higher.
• Blockbuster Inc. (NYSE: BBI) had another disappointing quarter as same-store sales declined.
• CIT Group Inc. (NYSE: CIT) delayed its Q3 report due to ongoing debt restructuring and a possible bankruptcy.
• Dr Pepper Snapple Group Inc. (NYSE: DPS) Q2 earnings came in well ahead of Wall Street expectations.

Maker of tasty pastries, lunch meat, and shoe polish (?) Sara Lee Corp. (NYSE: SLE) surprised Wall Street this morning when it reported a fourth-quarter loss of $14 million, or two cents per share. Last year in the same reporting period, SLE lost $672 million, or 95 cents per share.

Not only were these numbers an improvement on a year-over-year basis, but they topped analysts' expectations as well. Excluding charges related in part to its Spanish bakery business, the firm banked 29 cents per share, topping per-share estimates of 24 cents. Revenue was off 10% during the quarter to $3.16 billion.

Last week offered mixed messages about whether an economic recovery is indeed underway. The unemployment figures were not as bad as feared, but July sales numbers were nothing to write home about, despite the wild popularity of the so-called cash-for-clunkers program.

The question is, where has consumer confidence (and consumer spending) been? Retail is a good place to look, and as it turns out, this week several shopping mall and strip mall favorites will be reporting earnings for the most recent quarter.

Don't look now, but Sara Lee (NYSE: SLE) is up about 20% in the past month. People gotta eat, and, thanks to the recession, they're opting to eat at home more often.

Sara Lee reports earnings on August 12, and analysts expect earnings per share to be 5 cents less than a year ago. Last quarter, the company blew out the estimate by nearly 40%.

With sentiment mixed (only a third of analysts rate the shares a "buy"), another beat this quarter should keep the rally intact.

Buy SLE call options.

Next: Earnings Trade #4

Beating the Street at the earnings game is all about knowing the market's true expectations for a stock.

Knowing the market's expectations -- not just the analyst expectations -- for a stock will often provide the edge necessary to turn earnings season into a profit opportunity.

The more data and trends you can look at to determine not only what investors expect, but also how investors are positioning themselves for the expected move, the better.

This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.

"To paraphrase its marketing slogan: 'Nobody shouldn't like Sara Lee (NYSE: SLE),'" says Steve Ralston, consumer products sector expert at Zacks Investment Research.

"From the sales of staple products, consumer non-durable companies generate solid cash flow, with which management can enhance shareholder value through share repurchases and dividend increases.

"Recently restructured consumer non-durable companies are especially attractive, particularly if they are well-managed, trade at a single-digit P/E, and yield more than 4%.

"My favorite stock for 2009 is Sara Lee. Sara Lee announced a 5-year restructuring plan (the Transformation Plan) 3-1/2 years ago. The company has been right-sized, having divested unprofitable and low margin businesses.

"Even in tough economic times, Sara Lee (NYSE: SLE) should fair well thanks to its offering of non-cyclical goods," says quantitative analyst Vahan Janjigian, editor of The Forbes Growth Investor.

"Sara Lee is a leading producer of branded foods, beverages, and personal care products. Roughly 50% of sales are generated outside of the U.S. Leading brands include Ball Park, Hillshire Farm, Jimmy Dean, Sara Lee, State Fair, Earth Grains, and Senseo brand coffee products.

"Management launched a comprehensive restructuring plan in 2005 to focus on core products and maximize operating efficiencies. These actions yielded $218 million in annualized cost savings in fiscal 2008.

"Food commodity costs soared earlier this year. However, SLE has been able to pass costs to customers through price increases. Furthermore, it has benefited from growing volumes. Fiscal Q4 net sales grew 12.2% year-over-year to $3.5 billion.

"With its earnings announcement, management issued fiscal 2009 guidance. It expects net sales to grow 4-6% year-over-year to $13.7-14 billion and pro forma earnings to grow 8-18% to 90-98 cents per share.

"Since issuing guidance, economic conditions have deteriorated significantly. This could lead to increased trading down activity to lower-priced brands or private-label goods.

"Also, the strengthening dollar has turned the foreign exchange tailwind into a headwind. Yet food commodity and energy costs have fallen significantly, which could provide margin relief for the company."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

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

• Cisco Systems Inc. (NASDAQ: CSCO) beat Q2 expectations but offered a weak outlook.
• Clear Channel Communications Inc. (NYSE: CCU) higher Q1 profits failed to beat expectations.
• Crocs Inc. (NASDAQ: CROX) just missed EPS estimates but raised its full-year guidance.
• CVS Caremark Corp. (NYSE: CVS) strong Q1 results only met Wall Street expectations.
• eResearch Technology Inc. (NASDAQ: ERES) beat Q1 expectations and offered Q2 and full-year guidance.
• Foster Wheeler Ltd. (NASDAQ: FWLT) beat estimates due to a boost in its power plant segment.
• Internet Brands Inc. (NASDAQ: INET) reported strong Q1 results on ongoing M&A.
• Midway Games Inc. (NYSE: MWY) widened its loss in Q1 but beat expectations.
• News Corp. (NYSE: NWS) Q3 earnings jumped on a one-time transaction with Liberty Media.
• NVIDIA Corp. (NASDAQ: NVDA) missed Q1 estimates but was upgraded by analysts anyway.
• NYSE Euronext (NYSE: NYX) reported a first-quarter profit above analysts' estimates.
• Sara Lee Corp. (NYSE: SLE) Q3 profits surged but fell short of analysts' expectations.
• World Wrestling Entertainment Inc. (NYSE: WWE) posted strong results but couldn't cover its dividend.

Upcoming results to watch for include Sprint Nextel (NYSE: S), XM Satellite Radio (NASDAQ: XMSR), Sirius Satellite Radio (NASDAQ: SIRI), Electronic Arts (NASDAQ: ERTS), Whole Foods (NASDAQ: WFMI), Wal-Mart (NYSE: WMT), Deere & Co. (NYSE: DE), Toll Brothers (NYSE: TOL), Applied Materials (NASDAQ: AMAT), JC Penney (NYSE: JCP), Macy's (NYSE: M), Nordstrom (NYSE: JWN), Hewlett-Packard (NYSE: HPQ), Abercrombie & Fitch (NYSE: ANF).

Visit AOL Money & Finance for more earnings coverage.

Shares of consumer goods giant Sara Lee (NYSE: SLE) have been taking a beating today after the company failed to meet analyst estimates for its fiscal third quarter.

At first glance, it looked like a fantastic quarter for the company, as profit rose by a remarkable 82%, but things start to look less than rosy once we take a closer look. Analysts had been expecting to see the company show earnings during the quarter of 24 cents a share, and were disappointed to see the company come in below this, with only 22 cents a share.

This is the second quarter in a row in which the company posted weaker than expected earnings, and is quickly erasing the progress that the stock has been making since the beginning of March.

MOST NOTEWORTHY: Priceline.com, Monster and Internap were today's noteworthy downgrades:

• Susquehanna downgraded Priceline.com (NASDAQ: PCLN) to Neutral from Positive as they believe upside may be difficult given the macro environment, competition, and currency headwinds.
  
• JP Morgan lowered Monster (NASDAQ: MNST) to Neutral from Overweight following the company's expectations for higher 1Q08 operating expenses.
  
• Internap (NASDAQ: INAP) was downgraded by Merriman to Neutral from Buy as they believe upside will be limited until the company can complete its integration of the VitalStream CDN acquisition.

OTHER DOWNGRADES:

• JP Morgan cut Sara Lee (NYSE: SLE) and Kraft Foods (NYSE: KFT) to Neutral from Overweight.
  
• Volkswagen (OTC: VLKAY) was downgraded at WestLB to Add from Buy.
  
• Merrill downgraded Getty Realty (NYSE: GTY) to Sell from Neutral.

First oil. Then copper, then lumber, and coal. And now grain.

The solid economic growth in the world's emerging markets that's caused oil / coal and commodities prices to surge is now fully hitting the grain market.

So much so, that some food producers are calling on the U.S. government to restrict exports due to soaring prices for grains they use to make cereal and other foods. Meanwhile, some farmers are asking the U.S. Government to ease restrictions to enable farmers to plant more acres, The Wall Street Journal reported Thursday [Subscription required].

For food producers, the issue involves limiting a major operating cost. During the past year, spring wheat has risen to an astounding $17.63 per bushel, up from about $4.90 a year ago. Flour, which used to cost about $15 per 100 pounds, now sells for about $45-48 per 100 pounds. Food producers say prices are increasing so fast, they can't pass along price increases quick enough to keep up.

MOST NOTEWORTHY: Athenahealth, Marvell Technology, Broadcom and Nvidia were today's noteworthy initiations:

• Athenahealth (NASDAQ: ATHN) was initiated with a Neutral rating at Goldman Sachs. Jefferies started shares of the stock with a Buy rating and $46 target, as they believe their estimates could prove conservative given potential upside from new and existing physicians adopting athenaClinicals.
• Kaufman Bros initiated Marvell Technology (NASDAQ: MRVL) with a Hold rating and $18 target, as they believe near-term growth prospects remain uncertain and recommends waiting for more favorable entry points.
  
• The firm also initiated Broadcom Corporation (NASDAQ: BRCM) with a Hold rating and $35 target, and believes the company's growth prospects are priced into shares following the recent rally, and started shares of Nvidia Corporation (NASDAQ: NVDA) with a Buy rating and $42 target, as they believe the company's growth opportunity and competitive strength remain intact and would be buyers at current levels.

OTHER INITIATIONS:

• Goldman started shares of Sara Lee (NYSE: SLE) with a Neutral rating and $16 target.
  
• UBS initiated US BioEnergy (NASDAQ: USBE) with a Neutral rating.
  
• Bear Stearns inititated CarMax (NYSE: KMX) with an Underperform rating.
  
• Wachovia started Teekay Offshore Partners (NYSE: TOO) and Holly Energy Partners (NYSE: HEP) with Market Perform ratings.

Update: Yesterday's (10-17-07) Wall Street Journal (subscription) article about this investigation began "Prominent American food companies are under scrutiny in a federal probe of possible fraud and corruption in the military's food-supply operations for the Iraq war", and went on to read "The inquiry is focused on whether the food companies set excessively high prices when they sold their goods to the Army's primary food contractor for the war zone." Today's (8-18-07) WSJ article about the investigation reported a very different slant to the story, suggesting that, rather than pursuing American producers, the government was investigating the wholesaler and companies involved in the Kuwait end. Given this change, I find the story I have written below no longer substantiated, and caution readers to wait along with me for more reliable information.

In accordance with our policy of owning up to what we have written, the post will remain.

A number of American food companies including Sara Lee (NYSE:SLE), ConAgra (NYSE: CAG) and Perdue Farms Inc. have come under suspicion of conspiring with Kuwait-based Agility Corp., a logistics supplier for the U.S. troops in Iraq, to inflate food supply costs. In June, Agility received a new, one-year, $2.8 billion contract to provide life support (billeting, motor pool, dining and medical support services) to troops in Iraq. Agility, until recently known as Public Warehousing, has enjoyed a series of support contracts throughout much of the Iraq conflict.

According to Reuters, the Defense and Justice Departments are investigating allegations that Agility may have taken kickbacks from its suppliers, as well as charging the U.S. military unreasonably high prices for provender.

Agility, founded in 1979, was taken public in 1997 and is traded on the Kuwait exchange. It employs over 20,000 people in over 100 countries, with an annual revenue of $4.5 billion. In June, it was also awarded a $43.6 million contract for base operations and maintenance services at U.S. Air Force bases in Spain.

Update: ConAgra has put out a press release claiming that the DOD is looking to them as witnesses, rather than perpetrators.

Branded food companies like Kraft (NYSE: KFT) and Sara Lee (NYSE: SLE) are facing competition from a source that has been an after-thought for years: private label products.

According (subscription required) to The Wall Street Journal, "Food retailers are growing more sophisticated about developing and branding their own products. They're even building brands that bear no resemblance to their store names, such as Target's Archer Farms line of gourmet oils, appetizers and frozen foods, and Safeway Inc. (NYSE: SWY) Eating Right line of frozen dinners, cereal and salad dressings."

Of course, grocers make more money selling products they make (or buy cheaply from a third-party manufacturer without the pricing power of a strong brand) and market themselves, rather than ones the buy from a large brand.

With American consumers not feeling quite as rich as they did during the days of the housing bubble and easy credit, private label brands should continue to gain market-share. Wal-Mart (NYSE: WMT) has reported that that is already happening, as a result of the cash-strapped consumer.

That could spell trouble for companies like Kraft and Sara Lee, and it could be great for grocery stores -- higher margins. Investors may want to pick their food-related investments accordingly.