Analyst upgrades:

• FBR Capital upgraded AutoZone (NYSE: AZO) to Market Perform from Underperform on valuation following the company's Q4 results but lowered its target on shares to $134 from $137.
• Citigroup upgraded Calpine (NYSE: CPN) to Buy from Hold on valuation following Wednesday's sell-off. The firm believes Harbinger's share sale reflects an issue with the shareholders, not with the company, and raised its price target on the stock to $16.50 from $13.
• Credit Suisse upgraded Knight Transportation (NYSE: KNX) to Neutral from Underperform and raised its target to $17 from $16 based on valuation and the improved freight environment.
• Citrix Systems (NASDAQ: CTXS) was upgraded to Conviction Buy from Buy at Goldman.
• Webster Financial (NYSE: WBS) was upgraded to Outperform from Sector Perform at RBC Capital.
• Dr. Reddy's Labs (NYSE: RDY) was upgraded to Overweight from Equal Weight at Morgan Stanley.

Analyst upgrades:

• Citigroup upgraded shares of Liberty Property Trust (NYSE:LRY) to Hold from Sell to reflect the company's capital raises and progress on leasing over the past quarter. The firm raised their target price to $21 from $16.
  
• UBS upgraded shares of Lonmin (Other OTC:LNMIY) to Neutral from Sell as they believe Xstrata may make an offer for the company.
  
• Cantor Fitzgerald upgraded RadiSys (NASDAQ:RSYS) to Buy from Hold after the company reported better-than-expected Q4 results and provided Q1 guidance which the firm believes indicates that fiscal 2009 results will be better than expected. The firm set a target of $8.50.
• Duke Energy (NYSE:DUK) and PG & E (NYSE:PCG) were raised to Outperform from Sector Perform at RBC Capital.
  
• Techne (NASDAQ:TECH) was upgraded at Baird to Outperform from Neutral.

The focus of last week's preview was on oil and energy companies, and we saw that big oil had a good week, reporting better-than-expected results and record profits driven by high prices in the third quarter. Energy-related companies are well represented again this week and expectations in general remain high.

Early in the week, analysts surveyed by Thomson Financial anticipate that the big earnings gainers will include EOG Resources Inc. (NYSE: EOG), Anadarko Petroleum Corp. (NYSE: APC), and Cimarex Energy Co. (NYSE: XEC), which are expected to post profits of $2.24 per share (up 64.7% from a year ago), $1.48 per share (up 52.7%) and $2.26 per share (up 61.1%) respectively. All three of them have offered positive surprises in recent quarters, and analysts on average recommend buying EOG and Anadarko. Other expected big earnings gainers early in the week include Forest Oil Corp. (NYSE: FST), Pioneer Natural Resources Co. (NYSE: PXD), Comstock Resources Inc. (NYSE: CRK), and MasterCard Inc. (NYSE: MA). The earnings of phosphates producer Innophos Holdings Inc. (NASDAQ: IPHS) are expected to have risen 92.3% to $3.37 per share. Innophos beat estimates in the previous quarter by a whopping 210%, and analysts have been impressed with Innophos's lack of debt and pricing gains despite the slowing economy, so, on average, they recommend buying IPHS.

Also early in the week, analysts expect Goodyear Tire & Rubber Co. (NYSE: GT), Kaiser Aluminum Corp. (NASDAQ: KALU), and Oshkosh Corp. (NYSE: OSK) to report that their profits fell 52.9% to $0.33 per share, 45.1% to $0.67 per share, and 41.2% to $0.67 per share, respectively. These companies have tended to beat estimates in recent quarters, and the consensus recommendations of analysts are to buy them. However, PMI Group Inc. (NYSE: PMI), one of the largest private mortgage insurance providers in the U.S., is expected to take another hit as the housing slump drags on. The California-based company is expected to have widened its net loss from $1.04 per share a year ago to $2.43 per share in the most recent quarter. Its shares are down 84.5% from a year ago, and have been trading recently near their 52-week low.

Analyst upgrades:

• Jefferies upgraded shares of Safeway (NYSE: SWY) to Hold from Underperform on valuation as they believe the company's pricing pressure and sluggish sales trends are now priced in. The firm raised its target to $23.50 from $21.
  
• Merrill upgraded Pfizer (NYSE: PFE) to Buy from Underperform citing attractive dividend yield and stabilizing businesses.
  
• Banc of America upgraded shares of Apollo Group (NASDAQ: APOL) to Neutral from Sell and raised APOL's target to $60 from $48 on valuation as they see a balanced risk/reward at current levels.
• Nucor (NYSE: NUE) was raised to Overweight from Equal Weight at Morgan Stanley.
  
• Citrix Systems (NASDAQ: CTXS) and Symantec (NASDAQ: SYMC) were upgraded to Overweight from Neutral at JP Morgan.
  
• Keefe Bruyette upgraded Jefferies Group (NYSE: JEF) and Bank of America (NYSE: BAC) to Market Perform from Underperform.

Analyst downgrades:

"Geothermal energy, or heat from the earth, is largely non-polluting, and is renewable and reliable," says Ashley Winters and John Parke.

In Stephen Leeb's The Complete Investor, they look at a trio of plays on geothermal energy: Chevron (NYSE: CVX), Calpine (NYSE: CPN), and Ormat Technologies (NYSE: ORA).

"Throughout the globe, heat is continually produced in a layer far below the earth's crust. Large power plants can capture and use this steam to provide electricity on a fairly large scale.

"In Iceland, by some estimates, 50% of all energy needs are met through an alternative energy source that has been known for a long time.

"Geothermal is used in many other places as well. The largest system in operation is in California just north of San Francisco, in an area known as the Geysers.

"Efforts are also underway to use geothermal heat via 'hot dry rock' technology. Rocks are broken up by pumping water through them at high pressure; water is then pumped through the broken rocks so that it can be heated by the earth's energy.

With the economy facing soaring crude oil prices for the past year, consumers and drivers have seen a major impact on their savings. It could seem as though the good old times are over. Gasoline at $4 a gallon is not something we can ignore, and if we take into account that Americans consume nearly 40% of the world's gasoline, you can see where the problems begin. So the surge in oil prices came with an imminent effect on consumers, who had to cut back on their spending.

But since we are already in this unpleasant situation, Kiplinger offers some solutions to help investors fight against high oil prices. Kiplinger underlines in this article that one smart move would be to minimize the cost of driving by making some good energy-related investments.

Gerry Jordan, manager of Jordan Opportunity, recommends investors invest in oil companies such as Schlumberger Ltd. (NYSE: SLB) and Weatherford International (NYSE: WFT), citing strong international business. In addition, Jordan believes that higher crude prices will increase drilling demand. On the other hand, Jordan also loves power companies like Calpine Corp. (NYSE: CPN) and Reliant Energy Inc. (NYSE: RRI) as he anticipates huge power outages across the globe during this year.

Calpine (NYSE: CPN), which is a major power company, has experienced lots of drama over the years. However, the company has been able to stabilize things – and has recently come out of bankruptcy.

But suddenly the drama has returned: NRG Energy (NYSE: NRG), a rival, has made a $11 billion hostile bid for Calpine (it's a stock-for-stock transaction).

And there's lots of momentum for the deal. Keep in mind that Harbinger Capital Partners, which is a major hedge fund, owns 24% of Calpine's shares and is pushing for a combination.

No doubt, NRG-Calpine would be a powerhouse, amounting to roughly 45,000 megawatts. It will also expand NRG's presence in the valuable California market.

True, the valuation for the transactions looks meager. But, I suspect we'll ultimately see a higher bid. According to Harbinger's letter to Calpine:

"We believe this offer represents a good starting point and that the Board should immediately engage with NRG concerning the terms."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

NRG Energy (NYSE: NRG) confirmed an all-stock transaction with an exchange ratio of 0.534 for CPN shares, valuing the potential transaction at $22.70.

Calpine (NYSE: CPN) closed at $21.28 Wednesday.

CPN overall option implied volatility of 41 is near its 16-week average of 43 according to Track Data, suggesting non-directional risk.

Stock futures were a little higher early Thursday morning as stocks seemed poised for a rebound after plunging the last two straight sessions and as oil crossed $135 per barrel.

On Wednesday, U.S. stocks dropped sharply, again, as oil continued to rally, breaking new highs throughout the day and as the FOMC minutes indicated the Federal Reserve expects higher inflation and slower economic growth. The Dow industrials finished the day down 227 points, or 1.77%, the same as the Nasdaq Composite which lost 43 points, and the S&P 500 declined 22 points, or 1.61%.

Not much economic news today except for weekly jobless claims, but no doubt investors will continue to focus on the surging price of oil, now blamed also on Wall Street as traders are scrambling to cover bets. Oil prices rose above $135 to $135.09 a barrel for the first time Thursday, as supply concerns continued increased with reports that the International Energy Agency would cut its supply predictions. Even with assumption that global demand possibly weakening, the weakening U.S dollar drove crude futures up. Still, some blame the oil's rally due to traders covering wrong-way bets that prices would decline and buying crude, according to data from the New York Mercantile Exchange.

MOST NOTEWORTHY: Alliance Imaging, Calpine and CommVault were today's noteworthy initiations:

• Stanford finds shares of Alliance Imaging (NYSE: AIQ) fairly valued and believes the company's transition to providing imaging services to hospitals from mobile imaging equipment to fixed imaging equipment will take at least several years. The firm initiated coverage with a Hold rating.
  
• Calpine (NYSE: CPN) was initiated with a Buy rating and $21.50 target at Jefferies. The firm views Calpine as a low-cost valuation generation company and expects earnings growth from its Western and Texas power plants to drive improved results.
  
• Cowen assumed CommVault (NASDAQ: CVLT) with a Neutral rating and sees limited upside to 2009 estimates due to sales and marketing investments, as well as competition.

OTHER INITIATIONS:

• UBS initiated Omrix Biopharm (NASDAQ: OMRI) with a Buy rating and $17 target.
  
• Susquehanna initiated Align Tech (NASDAQ: ALGN) with a Neutral rating.
  
• Zions Bancorp (NASDAQ: ZION) was assumed with a Neutral rating and $13 target at Baird.