Generally, an investment strategy that focuses the total average annual return on equity over longer time periods tends to avoid an evaluation of companies that are about to or that have recently reported quarterly earnings. But there are exceptions, and International Paper (NYSE: IP) is one.

International Paper Friday reported unspectacular Q3 EPS of 57 cents compared to the Reuters consensus estimate of 57 cents. IP also reported Q3 revenue of $5.54 billion versus the Reuters consensus estimate of $5.36 billion. In other words, IP's performance barely met the Wall Street's expectations, and the Street was not overjoyed, with IP's shares declining 68 cents to $35.39 in Friday afternoon trading.

Still, the IP investment thesis remains largely intact. A restructuring has re-aligned its product mix and cut costs, while balance sheet improvements mean the company can more-quickly make investments in faster-growth regions. Further, while domestic free sheet (used in copiers, envelopes, forms) and linerboard (used in corrugated boxes) demand is expected to remain soft in 2008, international demand should grow at an acceptable rate.

The Volunteer State is the home of Elvis Presley and the Grand Old Opry, former Vice President Al Gore, presidential candidate Fred Thompson, and the NFL's Tennessee Titans. Economically, Tennessee is the home of textiles, cotton, cattle, and electricity production, as well as mega corporations such as FedEx Corp. (NYSE: FDX) and International Paper Co. (NYSE: IP). And it is also the home of four companies from Fortune's 2007 list of the fastest growing public companies in the U.S.: Psychiatric Solutions Inc. (NASDAQ: PSYS), Pinnacle Financial Partners (NASDAQ: PNFP), Miller Industries Inc. (NYSE: MLR), and First Acceptance Corp. (NYSE: FAC).

At number 49 on Fortune's list was Psychiatric Solutions (PSI), the Franklin-based health care provider, which has grown in part through acquisitions. It has 900 psychiatric hospitals in 30 states, and operates in-patient facilities for other hospitals and government organizations. PSI's three-year revenue growth was 50%; three-year earnings per share growth at 76%. In July, PSI reported a record second quarter and a Lehman Brothers analyst expects PSI to meet or beat expectations in the current quarter. The consensus of analysts surveyed by Thomson Financial is that PSI is a buy, but Standard & Poor's is among those that consider PSI a strong buy. The share price was $39.90 on at the close on Friday.

Nashville-based Pinnacle Financial Partners is the holding company for Pinnacle National Bank, and holds assets of more than $2 billion. Pinnacle's three-year revenue growth was 81%, and its three-year earnings per share growth was 46%. Despite a strong second quarter report, the share price dropped to a 52-week low of $21.62 in August, but has bounced back since to $30.63 at the close on Friday. In September, a Pinnacle director bought 5,000 common shares of PNFP, and Pinnacle was among southern regional banks considered good bets despite the current credit climate. Analysts surveyed by Thomson Financial consider Pinnacle Financial a buy.

MOST NOTEWORTHY: SanDisk Corp (SNDK), Nationwide Financial Services (NFS), Unica Corp (UNCA), International Paper Co (IP) and the Apartment REIT sector topped the day's noteworthy downgrades:

• CIBC cut SanDisk Corp (NASDAQ: SNDK) to Sector Performer from Outperformer on valuation.

• Nationwide Financial (NYSE: NFS) was downgraded to Underweight from Equal-Weight at Morgan Stanley on valuation.

• Ferris Baker cut Unica Corp (NASDAQ: UNCA) to Sell from Hold following the company's announcement that it has dismissed auditors Ernst & Young. Montgomery downgraded Unica to Hold from Buy on valuation.

• International Paper (NYSE: IP) was downgraded to Neutral from Outperform at Credit Suisse on valuation.

• UBS downgraded the Apartment REIT sector to Underweight and downgraded BRE Properties (NYSE: BRE), Camden Property Trust (NYSE: CPT) and Meruelo Maddux Properties (NASDAQ: MMPI) to Neutral from Buy...

OTHER DOWNGRADES:

• JP Morgan cut Moody's Corp (NYSE: MCO) to Neutral from Overweight.

• Lehman downgraded Powerwave Technologies (NASDAQ: PWAV) to Equal-Weight from Overweight.

• Goldman downgraded Target Corp (NYSE: TGT) to Neutral from Buy.

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

MOST NOTEWORTHY: New York Times Co (NYT), New York Community Bancorp, Inc (NYB), Cadbury Schweppes plc (CSG), International Paper Co (IP) and TurboChef Technologies, Inc (OVEN) were today's noteworthy upgrades:

• JP Morgan upgraded shares of the New York Times Co (NYSE: NYT) to Neutral from Underweight to reflect easier advertising sales comparisons the rest of the year and the possibility for a stepped-up buyback program.

• Friedman Billings upgraded New York Community Bancorp (NYSE: NYB) to Market Perform from Underperform with an $18 target.

• Bernstein upgraded shares of Cadbury Schweppes (NYSE: CSG) to Outperform from Market Perform and revised its sum-of-the-parts and "real options" analysis. The firm still sees major upside and limited downside at these levels.

• Matrix believes higher selling prices and lower costs are improving profit margins at International Paper (NYSE: IP).

• TurboChef Technologies (NASDAQ: OVEN) was upgraded to Sector Perform from Underperform following Q1 results...

OTHER UPGRADES:

• Citigroup upgraded H.J. Heinz Co (NYSE: HNZ) to Buy from Hold with a $52 target.

• AG Edwards raised Corporate Office Properties Trust (NYSE: OFC) to Buy from Hold.

• Baird transitioned coverage of Pike Electric Corp (NYSE: PEC) with an Outperform rating, up from Neutral.

• Medical Properties Trust, Inc (NYSE: MPW) was upgraded to Buy from Hold at Stifel.

• Buckingham raised Eaton Corp (NYSE: ETN) to Strong Buy from Accumulate.

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

MOST NOTEWORTHY: First Data Corp (FDC), Pinnacle Entertainment, Inc (PNK), Cephalon, Inc (CEPH) and Verint Systems Inc (VRNT) were some of today's downgrades:

• UBS downgraded First Data Corp (NYSE: FDC) to Neutral from Buy following the acquisition by KKR.

• Pinnacle Entertainment (NYSE: PNK) was cut to Hold from Buy at Matrix USA, as the firm believes post-hurricane reconstruction efforts are leading to significant capital expenditures, which limits upside.

• Cephalon Inc (NASDAQ: CEPH) was removed from American Technology's Focus List with shares up 15% in three weeks as the approval of Nuvigil without a Black Box warning has passed.

• JP Morgan cut shares of Verint Systems (NASDAQ: VRNT) to Underweight from Neutral, citing risks and costs associated from the Witness Systems' (WITS) acquisition.

OTHER DOWNGRADES:

• Labor Ready, Inc (NYSE: LRW) was downgraded to Sell from Neutral at Goldman based on the slowdown in U.S. residential construction activity.

• Citigroup downgraded International Paper Co (NYSE: IP) to Hold from Buy with a $39 target.

• Bernstein cut MedImmune, Inc (NASDAQ: MEDI) to Market Perform from Outperform.

• Sanders Morris downgraded Dreamworks Animation SKG, Inc (NYSE: DWA) to Neutral from Buy on valuation.

• JP Morgan downgraded Icagen, Inc (NASDAQ: ICGN) to Neutral from Overweight.

• Friedman Billings cut CompuDyne Corp (NASDAQ: CDCY) to Market Perform from Outperform following Q4 results.

• Roth Capital cut LivePerson, Inc (NASDAQ: LPSN) to Sell from Hold.

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

MOST NOTEWORTHY: Rivals Coca-Cola Co (KO) and PepsiCo Inc (PEP), as well as General Mills (GIS), were today's notable upgrades.

• Goldman Sachs upgraded both The Coca-Coca Co (NYSE: KO) and PepsiCo Inc (NYSE: PEP) to Buy from Neutral: The upgrade for Coca-Coca was to reflect the company's recent strong results, and Pepsi's upgrade was to reflect Gatorade's expected profit re-acceleration by the second half of 2007.

• General Mills Inc (NYSE: GIS) was upgraded to Market Perform from Underperform at BMO Capital Markets with a $58 target based on achievable outlook and absence of any negative catalysts.

OTHER UPGRADES:

• Bank of America upgraded Colgate-Palmolive Co (NYSE: CL) to Buy from Neutral with a $74 target. The firm believes Colgate's long-term growth rate can accelerate to 12-13% from 10% on margin upside.

• Prudential upgraded shares of Avon Products Inc (NYSE: AVP) to Neutral from Underweight to reflect the company's improving fundamentals; the firm believes that news over the last six months has been getting more positive.

• Buckingham upgraded Tween Brands Inc (NYSE: TWB) to Accumulate from Neutral.

• CIBC upgraded Cablevision Systems Corp (NYSE: CVC) to Buy from Hold. Raymond James raised Lithia Motors (LAD) to Strong Buy from Market Perform following its Q4 report and guidance.

• First Albany upgraded Stamps.com Inc (NASDAQ: STMP) to Buy from Neutral, with a $19 target.

• Deutsche Bank upgraded International Paper Co (NYSE: IP), Packaging Corp of America (NYSE: PKG) and Smurfit-Stone Container Corp (NASDAQ: SSCC) to Buy from Hold. The firm believes momentum is turning and backlogs and pricing are emerging from the winter doldrums stronger than expected.

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

Numbers are Actual vs. Estimate

Excellent Reports

• Goodrich Corp. (NYSE: GR) 78c vs. 67c
• Goodrich profits increased on a jump in sales of aircraft equipment to Boeing and Airbus. The company said margin expansion associated with sales growth and improved operating efficiencies are primary reasons for a continued positive outlook.
  

• International Paper Company (NYSE: IP) 47c vs. 35c
• The company's profits rose on a gain from the sale of its U.S. forestlands and a strong operating profit from its industrial packaging unit. IP is transforming operations to focus on its global uncoated papers and packaging business.
  

• Starwood Hotels & Resorts Worldwide (NYSE: HOT) 92c vs. 73c
• Higher room rates helped to contribute to a strong quarter for the parent of hotel chains including St. Regis, Westin and Sheraton. The company has been enjoying strong travel demand and limited growth in supply. It has also been selling hotels and retaining management contracts to free up cash.
• Electronic Arts (NASDAQ: ERTS) 63c vs. 57c
• The video game publisher had a 38% drop in quarterly profit but beat Wall Street targets, overcoming investor anxiety that holiday shortages of new video game consoles would hurt sales. Shares rose 6% on the news. Company CFO Warren Jenson said EA was entering a growth period.

Futures are positive in early morning trade, pointing to a higher start for stock.

Today investors will analyze the data from the retail sector, they will look at some economic indicators for an idea about employment, inflation and productivity. Strong retail sales could help the market rally, as are the falling oil prices of this morning.

This morning, some retailers have already reported same-stores sales and the market is now looking for a 3.4% rise in October for the industry, or a 4.9% increases ex-Wal-Mart Stores, Inc. (NASDAQ:WMT). Wal-Mart said last week it is expecting a 0.5% gain in same-store sales (sales at stores that have been open at least a year). It had just reported as expected.

Already reporting sales data this morning are Costco Wholesale Corp. (NASDAQ:COST) with a 4% rise, Pier 1 Imports, Inc. (NYSE:PIR) with an over 13% decline in sales, and American Eagle Outfitters, Inc. (NASDAQ:AEOS) that reported an 8% jump in same-store sales last night. AEOS also raised third-quarter earnings guidance. The stock might still be under pressure as some were expecting a 10% rise in sales. Walgreen Co. (NYSE:WAG) Oct same-store sales rose 11.4% and J.C. Penney Co.'s (NYSE:JCP) sales rose 8.1%.

This morning, some economic data is also due out. First, weekly jobless claims will be released at 8:30, but investors are waiting the main job report tomorrow. Also at 8:30, third-quarter productivity and unit labor costs will be reported. Unit labor cost could give investors a better idea about inflation, so barring any surprises, this is the number to watch out for. Finally, at 10:00, September factory orders are due. The European Central Bank makes its decision on interest rate today.

Top news stories this morning:

According to the Wall Street Journal, Tribune Co. (NYSE:TRB) said that due to low bids, it is now prepared to sell parts of the business and will consider offers.

Unilever NV/PLC (NYSE:UN, UL) reported a third-quarter profit drop of 48% after one-time gains from asset sales. Sales rose 1.6%. The figures were at the top end of market forecasts. Unilever shares were up over 4% in Europe.

Reporting today:

• Caremark Rx Inc. (CMX) - 63 cents per share for Q3.
• CVS Corp. (CVS) - 32 cents per share for Q3.
• International Paper Co. (IP) - 43 cents per share for Q3.
• Whole Foods Market Inc. (WFMI) - 29 cents per share for Q4.

Other stories:

Electronic Data Systems Corp. (EDS) reported third-quarter after the bell yesterday with profit climbing sharply to 24 cents per share on a 9% increase in revenue of $5.29. However the company said contracts for future work declined. Analysts were expecting 20 cents per share.

Apple Computer, Inc.'s (NASDAQ:AAPL) new iPod Shuffle will arrives in stores this Friday, tomorrow.

Goldman Sachs upgraded Dell, Inc. (NASDAQ:DELL) to neutral from sell.

General Electric Co. (NYSE:GE) has signed a $300 million deal with a Chinese company to make jet engine parts for it.and French engine maker Snecma.

In the auto industry:

• New car registrations in Germany are expected to have risen in October with foreign automakers boosting their share of Europe's biggest car market to 36.1%.
• Advanced Auto Parts Inc. (NYSE:AAP) reported Q3 (ending Oct 7) net income dropped to $58.9 million, or 56 cents a share but it includes 3 cents a share in stock option expense. Revenue rose to $1.1 billion from $1 billion. Analysts expected earnings of 54 cents a share. The company also lowered Q4 guidance.

Following Baidu.com, Inc.'s (NASDAQ:BIDU) earning, yesterday I revisited rumors of Google, Inc. (NASDAQ:GOOG) or Yahoo!, Inc. (NASDAQ:YHOO) buying Baidu.

Google is releasing a new version of its mobile email today.

Yahoo is going into the food business starting a site offering thousands of recipes, advice from chefs, video cooking guides and easy-to-use Web tools to help cooks answer the daily question: What's for dinner?

Hewlett-Packard (NYSE:HPQ) will have a fourth quarter earnings call on Thursday, Nov. 16, 5:30 p.m. ET/2:30 p.m. PT here.

Wendy's (NYSE:WEN) is offering DVD movie kiosks at its restaurants.

In Pharma: Global pharmaceutical sales grew 5% in the 12 months to August in leading markets, the same rate as recorded a month earlier. Pfizer Inc's (NYSE:PFE) Lipitor cholesterol pill remained the top-selling drug with sales of $11.6 billion.

Russian oil output fell again in October partly because the country and Exxon Mobil (NYSE:XOM) holding back the start up of full-scale production due to differences.

XM Satellite Radio (NASDAQ:XMSR) and Cingular Wireless (held by AT&T (NYSE:T)) announced a partnership to stream 25 XM music channels to Cingular handsets.