Analyst Upgrades

• Baird upgraded Starbucks (NASDAQ: SBUX) to Outperform from Neutral based on field research that indicates improving traffic trends and visibility from cost savings initiatives.
• FBR Capital upgraded E*Trade (NASDAQ: ETFC) to Outperform from Underperform citing an attractive risk/reward following the company's capital raise and debt exchange commencement. The firm believes the worst is behind the company and has a $2 target on the stock.
• Oppenheimer upgraded Sonic (NASDAQ: SONC) to Outperform from Perform on expectations demand trends will improve, leading to more normalized profitability.
• Estee Lauder (NYSE: EL) was upgraded to Equal Weight from Underweight at Barclays.
• Motorola (NYSE: MOT) was upgraded to Buy from Neutral at BofA/Merrill.
• ConAgra (NYSE: CAG) was upgraded to Buy from Neutral at UBS.

Krispy Kreme Doughnuts' (NYSE: KKD) stock has had a nice run of late. It's doubled so far on the year-to-date frame. Is there something to this story? Before, there was nothing. Krispy Kreme has been a very troubled business, and it would be very difficult to convince me otherwise. But, have things changed?

Well, net income did drop in Q1. Krispy Kreme said it made t $0.03 per share. Last year at this time, the doughnut guru earned $0.06 per share. Although the profit decline isn't attractive, I liked the comps. Same-store sales at company locations increased over 2%.

If it's Wednesday, that means another change at Starbucks (NASDAQ: SBUX), right? Reuters is reporting that SBUX is "reworking 90 percent of its baked goods." The latest move by the caffeine king is to start selling baked goods without high-fructose corn syrup or artificial flavors and dyes. The company will also introduce salads and other items -- nothing like a coffee and some salad, right?

According to Michelle Gass, SBUX's executive vice president of marketing, "Food has been the Achilles' heel of the company. [...] That statement will be long buried after we launch this program." The new campaign from SBUX will be promoted as "Real Food. Simply Delicious." and is an extension of last year's healthy campaign.

Feel like a nice cup of decaf right about now? Don't plan on getting it at Starbucks. Popular blogger (and newspaper doomsayer) Jeff Jarvis is complaining about a new but not well publicized Starbucks policy to stop brewing fresh decaf coffee after the morning rush.

Starbucks, were the company to own up to the history of coffee, owes its origins -- not to the cafes of Italy where Howard Schultz drank the future -- but the coffeehouse culture of Central Europe. It wasn't as glamorous in the 80s and 90s to admit it, perhaps, and certainly there was no culture, coffeeshop or otherwise, to be had until McDonald's opened in Warsaw in the early 1990s.

Ironically, then, the Polish youth are embracing the newly-opened Starbucks cafes. Washington Post op-ed columnist Anne Applebaum is in Warsaw, and says that the new Starbucks there are met with open wallets and customers eager to buy the expensive brew and flaunt it, with "the famous green label facing outward."

On the back page of my Sunday New York Times I found a full-page four-color ad from Starbucks Corporation (NYS: SBUX). The big, bold type at the top of the ad said "They Want You To Think Coffee is Coffee. Well, It's Not Just Coffee. It's Starbucks." No, actually its just coffee. Really, really expensive coffee that was perfect for the frothy past three decades but far less so now. And when these types of pathetic bleats for help issue forth from massive lifestyle corporations, its best to start the Doomsday Clock.

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

• Baidu Inc. (NASDAQ: BIDU) reported better-than-expected Q1 earnings as revenues surged in the quarter.
• Burger King Holdings Inc. (NYSE: BKC) just beat Q3 expectations despite weak same-store sales growth.
• Corn Products International Inc. (NYSE: CPO) Q1 results were dragged down by higher corn costs.
• Dow Chemical Co. (NYSE: DOW) Q1 earnings sank on falling sales, job cuts and acquisition costs.
• Eastman Kodak Co. (NYSE: EK) reported a deeper-than-expected Q1 loss and suspended its dividend.
• Energizer Holdings Inc. (NYSE: ENR) posted better-than-expected Q2 earnings but revenue declined.

Starbucks (NASDAQ: SBUX) reported earnings after the bell on Wednesday. Today, shares are up almost 10% on active volume in early afternoon trading as I write this. What does the market see in the numbers that is making it so happy?

Well, it's difficult to say precisely. As we all know, Starbucks has been having its problems, and data in Q2 indicate that the status quo essentially remains. Sales: down almost 8%. Operating income: down 77%. Adjusted earnings per share: down two pennies to $0.16. Cash from operations: down 6%. Same-store sales: down 8%. See what I mean? I hate using the word "down" so many times.

Earnings season continues to move right along, and Wednesday following the market close coffee giant Starbucks Corporation (NASDAQ: SBUX) will get its chance to impress Wall Street.

The last time that the company reported earnings was back on January 28 when it failed to meet analyst expectations by posting 15 cents per share versus analyst estimates for 17 cents a share. This time around, analysts are looking for the company to show 15 cents a share for its fiscal second quarter.

"Hello to a new day," reads a sign at my neighborhood Starbucks Corp. (NASDAQ: SBUX). On the sign is advertised one of the "breakfast pairings at an attractive price," or what many critics have called Starbucks' attempt at "value meals": a Bacon Artisan Sandwich and a Tall Pike Place Coffee. No price is listed on the chalkboard, although new static-cling signs on the windows advertise a latte and "Perfect Oatmeal" for $3.95.

The question on everyone's lips, of course, is: will this work? Will customers buy it, figuratively, and, by taking out their wallets and buying? While I was impressed with the good taste of the sandwich, giving a thumbs up (and deciding that I would, indeed, choose to have breakfast instead of just coffee with the new meal deal -- at about $2 more, it seems to approach "bargain" status), the reaction of customers who don't typically shop at Starbucks; the real target of this campaign (along with those who've defected to McDonalds) was not encouraging.

Perhaps you will file this under things that only I find interesting, but this article details results from the Pew Research Center noting that 43% of people surveyed would rather live near McDonald's (NYSE: MCD) than Starbucks (NASDAQ: SBUX).

Interesting statistic. My guess is that the biggest reason the Golden Arches is more popular is that it offers far more food at a far cheaper price.

Starbucks (NASDAQ: SBUX) is making an aggressive move into the breakfast business, including a planned budget breakfast launch that looks to capitalize on the same recession that is hurting the company's overpriced coffee sales.

That has some analysts concerned that McDonald's (NYSE: MCD) could face some competitive pressure, but CEO Jim Skinner isn't buying it. He was asked at a luncheon in Chicago whether Starbucks' revamped breakfast menu was hurting his company: "No, I don't think so in terms of market share," he replied.

But before McDonald's shareholders breath a sign of relief, they should wait and see what happens in March. On the third day of next month, Starbucks will begin offering customers their choice a 12-ounce latte with a coffee cake or oatmeal, or a tall coffee with a breakfast sandwich, for $3.99. Starbucks gained fame for being the home of the $4 coffee, but now that includes breakfast too.

Coffee is set to be "one of the most promising commodities of 2009," according to a leading Swiss commodities analyst, who predicts coffee prices will rise, likely squeezing the already-decaffeinated profits at Starbucks (NASDAQ: SBUX) and Kraft (NYSE: KFT), maker of Maxwell House, among other major coffee retailers. Current prices are $1.1305 a pound, only up a 0.9% on the year, but experts predict greatly increasing costs due to declining production in Brazil and Colombia. Coffee futures are currently at $1.20 per pound for December 2009 contracts, and $1.227 per pound for March 2010 contracts.

How much price runup are we talking? It could be increasing a whopping 50% to $1.70 per pound by June 30, according to former Merrill Lynch analyst Judith Ganes-Chase, who runs a consulting firm in Katonah, New York.

Starbucks CEO Howard Schultz has finely crafted his publicity around yesterday's unveiling of Starbucks VIA, the instant coffee product to be sold at Starbucks (NASDAQ: SBUX) outlets starting next month. In a blog post at the Huffington Post, Schultz wrote that "the brands that endure are those that adapt to the changing needs of their customers, without forsaking their core values," and that his company believes "introducing a paradigm-changing and better-tasting instant coffee is a way to bring quality and value to the mass market, and to turn on a whole new set of coffee drinkers to the Starbucks brand."

My initial reaction was one of incredulity; but I was surprised that many commenters seemed excited about the product. And in yesterday's taste test conducted by WalletPop and BloggingStocks staffers in New York City, the general reaction was that the product tastes good; and was attractively packaged. Will customers actually buy it? I wondered. The answer to that is yet to be determined, but I can't help wondering if all the pundits are wrong.

As promised last week, here it is: Starbucks Corp. (NASDAQ: SBUX) and the "breakfast pairings at an attractive price," a.k.a. value meals. For $3.95, customers can purchase either a 12-ounce (tall) latte with a coffee cake or oatmeal; or a tall coffee with a breakfast sandwich. What's more, the company is rolling out new (to some areas) "artisan" sandwiches with bacon and ham, no, let's let Starbucks describe it: a "flavorful bakery-style sandwich made with a parmesan egg frittata, smoked bacon slices, and Gouda cheese on a perfectly-baked hand-shaped artisan roll;" and "a delightful combination made with a parmesan egg frittata, three slices of Black Forest ham, and mild cheddar on a perfectly-baked hand-shaped artisan roll." The new menu options and pricing will be available March 3.