Advance Auto Parts (NYSE: AAP - option chain) shares are dropping today after the company forecast a third-quarter profit of 57 cents per share, coming in way below analysts' estimates of 66 cents per share. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AAP.

This morning, AAP opened at $31.96. So far today the stock has hit a low of $27.73 and a high of $32.78. As of 12:05, AAP is trading at $29.71, down $4.66 (-13.6%). The chart for AAP looks neutral and S&P gives AAP a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $40 range.

MOST NOTEWORTHY: Advance Auto Parts Inc (NYSE: AAP), Solectron Corporation (NYSE: SLR), Carnival Corporation (NYSE: CCL) and Royal Caribbean Cruises Ltd (NYSE: RCL) and were today's noteworthy upgrades:

• JP Morgan upgraded shares of Advance Auto Parts to Neutral from Underweight citing increased confidence in the company's turnaround efforts.
• Solectron was upgraded to Neutral from Underperform at Credit Suisse to reflect the company's acquisition by Flextronics International (NASDAQ: FLEX).
• Carnival was upgraded to Strong Buy from Outperform and Royal Caribbean was upgraded to Outperform from Market Perform at Raymond James.

OTHER UPGRADES:

• BHP Billiton Ltd (NYSE: BHP) was upgraded to Buy from Hold at Citigroup on valuation and their expectations for higher commodity prices.
• Matrix USA upgraded shares of Callaway Golf Company (NYSE: ELY) to Hold from Strong Sell, as the firm believes growing demand for new products is driving positive fundamental trends.
• Lehman upgraded Dow Chemical (NYSE: DOW) to Overweight from Equal Weight, citing the potential for an accretive acquisition of buyback.

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

MOST NOTEWORTHY: Today's most noteworthy downgrades included Armor Holdings, Inc (AH), Alcan Inc (AL), Advance Auto Parts, Inc (AAP) and Reuters Group PLC (RTRSY):

• Armor Holdings Inc (NYSE: AH) was downgraded to Neutral from Overweight at JP Morgan based on the news that the company will be sold to BAE Systems PLC (BAESY) for $88 a share in cash. The firm expects the deal to close with no higher offers. Bear Stearns cut Armor Holdings to Peer Perform from Outperform and Friedman Billings cut shares of the vehicle armorer to Market Perform from Outperform.

• Alcan Inc (NYSE: AL) was cut to Neutral from Buy at Bank of America and DA Davidson following the Alcoa (AA) bid.

• Baird cut Advance Auto Parts (NYSE: AAP) to Neutral from Outperform following CEO Michael Coppola's resignation. Kevin Dann downgraded Advance to Hold from Buy to reflect an increased level of uncertainty following Mr. Coppola's departure.

• Lehman Brothers downgraded Reuters Group (NASDAQ: RTRSY) to Equal Weight from Overweight pending further information on the Thompson Corp (TOC) bid; Credit Suisse cut shares to Neutral from Outperform and Deutsche Bank cut shares to Hold from Buy.

OTHER DOWNGRADES:

• Matrix downgraded UST Inc (NYSE: UST) to Sell from Hold.

• Needham cut Entegris, Inc (NASDAQ: ENTG) to Hold from Buy.

• UBS downgraded shares of Golden Star Resources (AMEX: GSS) to Reduce from Neutral.

• Wachovia cut Rowan Cos (NYSE: RDC) to Market Perform from Outperform.

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