MOST NOTEWORTHY: Potash, Cadbury Schweppes and Zoran were today's noteworthy upgrades:

• Citigroup upgraded shares of Potash (NYSE: POT) to Buy from Hold and raised its target to $178 from $141 to reflect their expectation for a more bullish outcome from the ongoing China Potash contract negotiations.
• Cadbury Schweppes (NYSE: CSG) was raised to Overweight from Neutral at JP Morgan to reflect the company's takeout potential and cash returns.
• Oppenheimer raised its rating on Zoran (NASDAQ: ZRAN) to Outperform from Perform on valuation, as they believe the recent weakness is overdone.

OTHER UPGRADES:

• Pep Boys (NYSE: PBY) was upgraded to Market Weight from Underweight at Thomas Weisel.
• JMP Securities upgraded Actuate (NASDAQ: ACTU) to Strong Buy from Outperform.
• Goldman raised Broadcom (NASDAQ: BRCM) to Buy from Neutral.

Last month, Canadian regulators began an investigation into allegations of price-fixing involving Hershey Co. (NYSE: HSY), Cadbury Schweppes PLC (NYSE: CSG) Mars Inc. and Nestlé SA (VTX: NESN).

Now our own Justice Department is looking into the issue as well. Chocolatiers have been battling with surging dairy prices and there have been allegations that various firms colluded to fix prices. Ontario's Superior Court of Justice has granted search warrants for the above candy makers, but no charges have been filed.

According (subscription required) to the Wall Street Journal, "It isn't clear precisely what the Justice Department is looking into or whether the preliminary inquiry will become a formal criminal investigation. Price fixing can be a serious offense, leading to heavy fines and, in some cases, jail terms for executives."

The legal issues aside, does anyone really think that lack of access to affordable chocolate is a serious problem in the United States? Judging from The US of A's collective waistline, a little price fixing and consumer gouging could do our body mass indexes a bit of good.

Cadbury Schweppes Plc (NYSE: CSG) will be spinning off its U.S. beverage unit soon after failing to find a buyer for the division, according to the company. Included in the spinoff will be popular brands Dr. Pepper and 7-UP, which will join other brands. The spinoff has been decided after seven months of fruitless searching by the British-based food giant to find a buyer for the unit.

Cadbury will soon be listing its U.S. drinks unit on the NYSE under a different ticker after finding that U.S. consumers are not choosing its products, opting apparently for competitive beverages from Coca-Cola, Inc. (NYSE: KO) and Pepsico, Inc. (NYSE: PEP) among other drinks. Investment analyst Martin Deboo said from London that "They (Cadbury) wouldn't refuse any sensible offer, but the uncertainty around credit markets has to clear before bidders will come forward." In other words, the credit crisis that has semi-gripped parts of the U.S. economy made potential buyers cinch up those purse strings. As a result, no serious bidders ever emerged over the summer, much to the chagrin of Cadbury's management.

At this time, Cadbury's U.S. drinks division is pegged at a $14 billion value, and although a spin-off is not exciting to anyone, it's required lest Cadbury continue to allow the suboptimal U.S. performance drag its overall financials down. The spinoff won't be completed before the second calendar quarter of 2008, according to Cadbury CEO Todd Stitzer. Earlier this year, Cadbury rejected an offer of about $13 billion from a private equity group comprised of the usual suspects: Blackstone Group LP, Kohlberg Kravis Roberts & Co. and Lion Capital LLP. Oh well -- it missed the boat and now has no buyers, so off to the NYSE it goes.

The Hershey Company's (NYSE: HSY) turmoil continues. After a continued decline in net income and stock price, the board, controlled by various Hershey trusts, announced yesterday its intent to take the steps necessary to reverse the trend.

The company has suffered an unfortunate coincidence of declining sales at the same time it is making a heavy investment in a new plant in Monterrey, Mexico. Ironically, the board killed a potential sale of the company several years ago, partly in response to fears that massive job losses in its American manufacturing plants might result.

Since then, the board has become more aggressive, while maintaining its firm intent to remain in control of the company. The Wall Street Journal's Julie Jargon [subscription] today reviewed the oft-speculated possibility that one of the companies that bid on Hershey's in 2002, Cadbury Schweppes PLC (NYSE: CSG), might split off its candy business and merge it with that of Hershey's. For such a deal to work, however, one of two things need to happen. Hershey could buy that portion of Cadbury Schweppes, which would require it to take on a heavy debt load that would be hard to justify given its recent performance, or the Hershey board will have to change its mind about selling off the business.

Given Hershey's new manufacturing capacity, such a merger makes even more sense in terms of production and logistics. Not coincidentally, the company announced last week that CEO Richard Lenny will retire at the end of the year. Look for the board to hire a new CEO who can find a way to structure such a deal.

Stock futures pointed to a lower start today after a late day rally saw both the Dow Jones Industrial Average and the S&P 500 close at record highs following the release of the FOMC minutes. While the minutes reinforced hopes of another rate cut, this morning, however, investors are focusing on a mixed bag of earnings with Alcoa missing slightly and Chevron warning of lower margins. The question may be, how much higher can we go?

While the minutes of the last Federal Reserve meeting yesterday revealed nothing new, this Fed inspired rally may cool down today. Bloomberg cites several economists who believe the Fed will hold, not cut, rates next meeting. The Fed policy makers "signaled they are in no hurry to reduce interest rates again because they aren't convinced the U.S. economic expansion is coming to an end." The records indicated that the Fed didn't want investors to conclude extra cuts were guaranteed, and since economic data following the meeting may have justified that the economy is still expanding, especially the manufacturing and services industries. The Fed noted though that housing is still weak and credit markets have improved but are still fragile. With the Fed inflation gauge within its target range of 1-2% the past three months, the data may be too mixed to get a clear indication as to the Fed's next move.

Economic reports today are few and include August wholesale inventories at 10:00 a.m. and weekly fuel inventory at 10:30.

Overseas, Asian markets kept up their record-setting pace by hitting new highs. European markets were mixed in morning trading.

But what investors will really focus on today will undoubtedly be corporate profits:
Yesterday after the close, Alcoa (NYSE: AA) was the first of the Dow stocks to report earnings. Alcoa posted a 3% rise in profit, despite slumping revenue. Earnings were $555 million, or 63 cents per share, for the quarter. Quarterly revenue slid more than 3%, to $7.39 billion. Wall Street expected earnings of 65 cents per share on $7.40 billion in revenue, according to Thomson Financial.

Costco Wholesale Corp. (NASDAQ: COST) reported fiscal fourth-quarter this morning, posting a 5% climb in profit on increased membership fee revenue and higher same-store warehouse sales. Net income rose to $372.4 million, or 83 cents per share. Excluding charges, earnings were $408.2 million, or 91 cents per share. Total quarterly revenue grew 3% to $20.48 billion. Analysts expected earnings of 83 cents per share on revenue of $20.73 billion according Thomson Financial.

Chevron (NYSE: CVX) told investors yesterday its third-quarter profit will drop sharply from the record levels due to shrinking margins.

In other corporate news, Cadbury Schweppes (NYSE: CSG) announced today it plans to spin off its U.S. beverage division that includes the Dr Pepper, 7Up and Snapple brands to its shareholders rather than sell it.

MOST NOTEWORTHY: Cadbury Schweppes, the food sector, Marsh & McLennan, Broadcom and Danone were today's noteworthy downgrades:

• Bear Stearns downgraded Cadbury Schweppes Plc (NYSE: CSG) shares to Underperform from Peer Perform as they are less confident the company will achieve its objective of divesting its beverage business at a reasonable price before the end of 2008.
  
• Bear downgraded the food group to Market Weight from Overweight based on valuations and macro economic trends. The firm downgraded Dean Foods Company (NYSE: DF) and Kellogg Company (NYSE: K) to Peer Perform from Outperform.
  
• JP Morgan downgraded shares of Marsh & McLennan Companies Inc (NYSE: MMC) to Neutral from Overweight citing management turnover which will impact the company's operating turnovers.
  
• JMP Securities downgraded Broadcom Corporation (NASDAQ: BRCM) to Market Perform from Outperform on valuation.
  
• Bear Stearns downgraded Groupe Danone (OTC: GDNNY) to Peer Perform from Outperform due to near-term headwinds; the firm prefers Nestle SA (OTC: NSRGY).

OTHER DOWNGRADES:

• Morgan Stanley downgraded the U.S. mortgage finance stocks to In Line from Attractive.
  
• Keefe Bruyette downgraded Legg Mason Inc (NYSE: LM) to Market Perform from Outperform.
  
• MercadoLibre Inc (NASDAQ: MELI) was downgraded at Merrill Lynch to Neutral from Buy.
  
• Oppenheimer downgraded Michael Baker Corporation (AMEX: BKR) to Neutral from Buy.

According to a report from Bloomberg this morning, Campbell Soup Co. (NYSE: CPB) is looking to rake in somewhere between $1 billion to $1.5 billion when it sells off its boutique chocolate brand Godiva Chocolatier. News of the company's interest in selling off the brand came early last month, at which time analysts had predicted the sale would bring in between $750 million and $1 billion.

The company first got involved with Godiva back in 1966 when it purchased one-third of the company, and following that took over ownership. Godiva represents around 7% of Campbell's total revenues, but the company has been careful to keep the brand separate from the core Campbell's name brand.

It makes sense that Campbell's would try to unload Godiva as it is trying to focus on "centering on convenience, wellness and quality," and are looking to expand its soups business more in China and Russia, two countries that have faster growing economies and larger soup consumption than America.

Some potential buyers for Godiva could be Hershey Co. (NYSE: HSY), Mars Inc. and Cadbury Schweppes Plc (NYSE: CSG), according to Credit Suisse. Another company that has publicly stated interest is Swiss chocolate maker Lindt & Spruengli, which has announced yesterday that it will be raising its product prices from between 6 and ten percent, depending on the country, and will be looking into the possibility of picking up Godiva.

[Thanks to Jaye_Elle for the photo]

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: Cadbury Schweppes (CSG), Parker Hannifin (PH), Christopher & Banks (CBK), Benihana (BNHNA) and Sears Holdings (SHLD) were today's noteworthy downgrades:

• Cadbury Schweppes PLC (NYSE: CSG) was downgraded to Equal-Weight from Overweight at Lehman Brothers to reflect lower-than-expected value from Cadbury's American Beverages sale or demerger.
• Friedman Billings removed Parker Hannifin Corporation (NYSE: PH) from its Top Picks List, citing valuation.
• Christopher & Banks Corporation (NYSE: CBK) was downgraded to Sector Performer from Outperformer at CIBC World Markets following the unexpected departure of CEO Matthew Dillon. Suntrust downgraded shares of the stock to Neutral from Buy citing pressure in the retail sector.
• KeyBanc lowered shares of Benihana Inc (NASDAQ: BNHNA) to Buy from Aggressive Buy following the company's Q2 results.
• Sears Holdings Corporation (NASDAQ: SHLD) was downgraded to Peer Perform from Outperform at Bear Stearns citing a continued deterioration in fundamentals and challenging outlook...

OTHER DOWNGRADES:

• Brocade Communications Systems Inc (NASDAQ: BRCD) was removed from JP Morgan's Focus List; the firm maintained its Outperform rating.
• Goldman Sachs downgraded Renovis Inc (NASDAQ: RNVS) to Sell from Neutral.
• Raymond James downgraded shares of Amedisys Inc (NASDAQ: AMED) to Outperform from Strong Buy and shares of Restoration Hardware Inc (NASDAQ: RSTO) to Underperform from Market Perform.
• Biogen Idec Incorporated (NASDAQ: BIIB) was downgraded to Hold from Buy at BWS Financial.

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

When BloggingStocks contributor Georges Yared recently took a look at lenders that could rise up out of the recent subprime-related credit mess, he focused on Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and US Bancorp (NYSE: USB) as strong contenders.

Well, the European markets have been struggling with many of the same credit concerns as in the U.S. Morningstar (NASDAQ: MORN) has gone looking for investment opportunities in European markets, and found such contenders as Alcatel-Lucent (NYSE: ALU), France Telecom (NYSE: FTE), and Cadbury Schweppes (NYSE: CSG). However, like Mr. Yared, Morningstar analysts found themselves focusing on a pair of wide-moat lenders that had been unfairly punished by reactions to the current problems.

MAJOR PAPERS:

• Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) acquired a stake in Kraft Foods Inc (NYSE: KFT) that was below 5%, the Wall Street Journal (subscription required) reported.
• R.H. Donnelley Corporation (NYSE: RHD) has paid about $350M for Business.com, the marketing directory Web company, beating out Dow Jones & Co. (NYSE: DJ) and the New York Times Company (NYSE: NYT) in the process, according to the Wall Street Journal.
• Callaway Golf Company (NYSE: ELY), which closed Wednesday at about $17.42, could swing lower as the peak summer season wanes amid continued concern about overall consumer discretionary spending, according to Barron's Online's (subscription required) "Weekday Trader" section.

OTHER PAPERS:

• The U.K. Times reported that the global debt market crisis may delay or cancel the sale of Cadbury Schweppes plc's (NYSE: CSG) U.S. drinks arm.
• Coca-Cola (NYSE: KO), Wipro Limited (NYSE: WIT) and Danone are in talks with Ramesh Chauhan to buy Bisleri, the bottled water brand that has become a generic name for the product category, reported the Economic Times.

It looks like The Coca-Cola Company (NYSE: KO) could be on its way to further expanding its presence in the "healthy drinks" market of juices, teas and waters. The Wall Street Journal reported this morning that the U.S. drinks giant unclear could be interested in a bid for Cadbury Schweppes PLC's (NYSE: CSG) Snapple and Mott's drinks brands, and has reportedly approached several private-equity groups involved in the bidding.

An acquisition of the brands would allow Coca-Cola to add to its non-cola portfolio. Snapple, the fourth-largest ready-to-drink tea brand in the U.S., also offers juice and lemonade drinks, while Mott's brands offer juices and sauces. Additionally, Coca-Cola may be able to gain market share on rival PepsiCo Inc (NYSE: PEP), which acquired health drink and tea maker Fuze Beverage LLC earlier this year. In May, Coke said it would acquire Energy Brands Inc for $4.1 billion, but has not said whether it would expand outside its core soda brands.

A decision on the drinks units are expected at the end of July. In addition to a potential offer from Coca-Cola, two groups of private-equity firms have bid on the drinks business. A sale is expected to bring in over $10 billion for Cadbury. While Cadbury may not look to sell the brands separately from the rest of its U.S. drinks business, Coca-Cola may opt to acquire Snapple and Mott's from the private-equity firms.

Would an acquisition be a step in the right direction for Coke? Although Snapple accounts for around 4.7% of Cadbury's overall U.S. beverage volume, sales have also declined in recent years. To boost sales, Cadbury recently introduced new "super premium" red, white and green teas, but the unit's sales still lag behind those of PepsiCo's Lipton, which is in first place among ready-to-drink teas, and those of Coke's Nestea brand.

MAJOR PAPERS:

• The Wall Street Journal reported that The ServiceMaster Company (NYSE: SVM) has shelved its $1.15B sale of junk bonds that would help to pay for the LBO of the company due to "investor nervousness."
• The Wall Street Journal reported that eBay Inc (NASDAQ: EBAY) has quietly opened a classified ad site in the U.S., which would rival Craigslist.
• According to people familiar with the situation, The Coca-Cola Company (NYSE: KO) has approached several private-equity firms that are involved in the bidding for Cadbury Schweppes plc's (NYSE: CSG) U.S. drinks business, reported the Wall Street Journal.

OTHER PAPERS:

• Research in Motion Limited (NASDAQ: RIMM) has been given clearance to sell its BlackBerry device in China, reported the New York Times.
• Big names like International Business Machines Corporation (NYSE: IBM), Infosys Technologies Limited (NASDAQ: INFY), TCS and The Blackstone Group LP (NYSE: BX) are opting out of the bidding race for Citigroup Incorporated's (NYSE: C) BPO arm, reported the Times of India.

Fresh off its acquisition of Vitamin Water, Coca Cola (NYSE: KO) is looking into buying the Snapple brand, a maker of iced tea and other non-carbonated beverages. The owner of Snapple, Cadbury Schweppes (NYSE: CSG), is splitting itself into two companies at the urging of super-investor Nelson Peltz. It is reportedly in talks with several private equity firms about selling Snapple, and Coke has said it's interested. Spokesman Dana Bolden said that "We're always looking at whether to build or buy", and indicated that the company would also consider developing its own brand in the same category if it doesn't buy Snapple.

An acquisition of Snapple would look like a step down from the Vitamin Water deal, unless it can be had at a great price, which is unlikely. Americans are becoming increasingly focused on healthier, lower-calorie alternatives to soda and Snapple beverages really aren't much lower in calories or sugar than most sodas.

The brand has tremendous value and is probably the leader in its category, but is not destined for the kind of long-term growth that Vitamin Water will see. Vitamin Water was Coke's largest acquisition ever, and buying another big brand like Snapple would mean that the company is on a bona fide buyout binge. Such binges seldom lead to an increase in shareholder value.

More Vitamin Water news

Beth Gaston Moon: High school vending machines getting more eclectic
Zac Bissonnette: PepsiCo plans a lower-calorie Gatorade
Jonathan Berr: Coke, Pepsi thirst for profits from bottled water
Zac Bissonnette: Experts doubt Snapple will satisfy Coke
Joseph Lazzaro: Coke's catching up in the health drink segment
Zac Bissonnette: Coke swallows Vitaminwater
Zac Bissonnette: Coke wants vitamin water
Zac Bissonnette: Coke Zero is no zero, it's a big hit
Sarah Gilbert: Fuze acquisition pits Coke v. Pepsi in ritzy juice war

MOST NOTEWORTHY: Cadbury Schweppes plc (CSG), Adobe Systems (ADBE), Verizon Communications (VZ) and Arcelor-Mittal (MT) were today's noteworthy downgrades:

• Citigroup downgraded shares of Cadbury Schweppes (NYSE: CSG) to Hold from Buy as they see limited upside now that the company is close to divesting its beverage division.

• Adobe (NASDAQ: ADBE) was cut to Neutral from Buy at Goldman and was removed from the Americas Buy List as they do not believe revenue growth will significantly top 17% this year and may not meet investors high expectations.

• Soleil downgraded shares of Verizon Communications (NYSE: VZ) to Sell from Hold on valuation as they think the stock is trading near the high end of a reasonable trading range. They believe shares are due for a 10%-15% correction.

• Merrill expects carbon steel prices to come under pressure in Q3, sending Arcelor-Mittal (NYSE: MT) shares to Neutral from Buy...

OTHER DOWNGRADES:

• Lehman cut Human Genome Sciences (NASDAQ: HGSI), Millennium Pharmaceuticals (NASDAQ: MLNM) and Biogen Idec Inc (NASDAQ: BIIB) to Equal Weight from Overweight.

• Stifel cut U.S. Xpress Enterprises (NASDAQ: XPRSA) to Hold from Buy.

• Calyon downgraded SkyWest, Inc (NASDAQ: SKYW) to Neutral from Buy.

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

Here is proof that if you mention enough possible outcomes, some of them will come true and you will look like a genius. Okay, maybe not, but anyway, Cadbury Schweppes plc (NYSE: CSG) released its Confectionery Strategy press release. Here are the two most important details found in it:

• Conveniently buried in the release, which quickly became the headline, was the 15% job reduction -- or about 7,500 layoffs. The company added that it would look to close 15% of its confectionery factories by 2011 as part of an austerity plan. These steep cuts are expected to save the company up to an estimated GBP300M.
• Also of note, after receiving "expressions of interest," the company said it would most likely sell its American business unit rather than demerge it.

The news dropped the stock about half a percent today to 55.75 in midday trading, which I find kind of surprising since both items are positive, at least for the company's costs. This may just be a case where the action -- while drastic -- was still not enough to satisfy investors, who possibly expected a more earthshaking announcement.