Tempur Pedic (NYSE: TPX - option chain) shares are rising today after the company posted a second-quarter profit of $16.86 million or 22 cents per share, topping analysts' projections of 18 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TPX.

TPX opened this morning at $13.04. So far today the stock has hit a low of $13.18 and a high of $14.09. As of 11:20, TPX is trading at $14.00 up 0.96 (7.4%). The chart for TPX looks neutral and S&P gives TPX a neutral 3 STARS (out of 5) hold ranking.

Tempur-Pedic (NYSE: TPX - option chain) shares are rising today after competitor Sealy Corp. (NYSE: ZZ) reported a preliminary second-quarter profit margin of 40.1 to 41.1 percent on revenue of $294 million to $301 million, in line with analyst forecasts of $296 million. This should be a good sign for TPX as well. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TPX.

TPX opened this morning at $12.04. So far today the stock has hit a low of $12.01 and a high of $13.22. As of 11:35, TPX is trading at $12.65 up 0.86 (7.3%). The chart for TPX looks neutral and S&P gives TPX a neutral 3 STARS (out of 5) hold ranking.

Tempur-Pedic International (NYSE: TPX) makes bedding products. Offerings include pillows, mattresses, adjustable beds and cushions. The goods feature a visco-elastic foam technology that was developed by NASA during the 1970s, to help cushion astronauts during liftoff. The company markets its products through furniture and department stores, medical retailers, hospitals and the Internet. They are sold under the brand names TEMPUR and Tempur-Pedic. About a third of Tempur-Pedic's revenue comes from international sales.

The company pleased investors last week, when it reported Q2 EPS of 27 cents and revenues of $238.7 million. Analysts had been looking for 23 cents and $232.9 million. Over the course of the quarter, the firm increased its cash balance by 46.8% and reduced total debt by 6.8%. Management also issued in-line guidance for FY08 results.

MOST NOTEWORTHY: SLM Corp, Tempur Pedic and ITT Corp were today's noteworthy downgrades:

• Morgan Stanley downgraded SLM Corp. (NYSE: SLM) to Underweight from Equal Weight citing the impact on earnings from reduced government subsidies and disrupted capital markets.
  
• Tempur Pedic (NYSE: TPX) was cut to Neutral from Overweight at JP Morgan citing the consumer slowdown and increased competition.
  
• Credit Suisse downgraded ITT Corp. (NYSE: ITT) to Neutral from Outperform citing the surprised management changes announced last night.

OTHER DOWNGRADES:

• Cowen downgraded TechTarget (NASDAQ: TTGT) to Neutral from Outperform.
  
• Merriman lowered Jamba (NASDAQ: JMBA) to Neutral from Buy.
  
• LSI Corp. (NYSE: LSI) was downgraded at Merrill to Neutral from Buy.

MOST NOTEWORTHY: BAE Systems, VASCO Data Security, Salesforce.com, Tempur Pedic and Fidelity National were today's noteworthy upgrades:

• Goldman added BAE Systems (OTC: BAESY) to its Conviction Buy List, as they believe the company's defensive growth characteristics will lead to outperformance.
• Jefferies upgraded shares of VASCO Data Security International Inc (NASDAQ: VDSI) to Buy from Hold on valuation following the recent sell-off in the stock.
• Salesforce.com Inc (NYSE: CRM) was upgraded to Outperform from Market Perform at Piper to reflect the company's strong cash flow generation and the firm's belief that CRM is a core holding in the enterprise application market.
• Citigroup upgraded shares of Tempur Pedic International Inc (NYSE: TPX) to Buy from Hold, as they believe double-digit sales growth and margin expansion will drive 25% EPS growth over the next few years.
• SunTrust raised its rating on Fidelity National Information Services Inc (NYSE: FIS) to Buy from Neutral on valuation.

OTHER UPGRADES:

• JP Morgan raised its rating on Mattel Inc (NYSE: MAT) to Overweight from Neutral.
• Broadpoint upgraded Pacific Ethanol Inc (NASDAQ: PEIX) to Underperform from Sell.
• Merrill upgraded Wyeth (NYSE: WYE) to Buy from Neutral.
• CIBC upgraded Acuity Brands Inc (NYSE: AYI) to Sector Outperformer from Sector Performer.

MOST NOTEWORTHY: The medical supplies and devices sector, East West Bancorp, Tempur Pedic and AbitibiBowater were today's noteworthy initiations:

• Credit Suisse initiated the medical supplies and devices sector with a Market Weight rating and started shares of Edwards Lifesciences (NYSE: EW) and Becton, Dickinson and Co (NYSE: BDX) with Outperform ratings and Medtronic (NYSE: MDT) and Boston Scientific (NYSE: BSX) with Neutral ratings.
  
• East West Bancorp (NASDAQ: EWBC) was initiated with a Buy rating and $36 target at B. Riley; the firm's target implies a 23.1% potential total return over the next twelve months including the stock's 1.35% dividend yield.
  
• Tempur Pedic (NYSE: TPX) was started with an Outperform rating at William Blair, as they find the current valuation attractive for long-term investor given the company's strong position in the specialty sleep products.
  
• Deutsche Bank resumed coverage of AbitibiBowater (NYSE: ABH) with a Hold rating and $29 target, citing the strength of the Canadian dollar and difficult newsprint fundamentals.

OTHER INITIATIONS:

• Banc of America initiated shares of JA Solar (NASDAQ: JASO) and Trina Solar (NYSE: TSL) with Buy ratings and targets of $73 and $76, and initiated Horizon Lines (NYSE: HRZ) and Solarfun Power (NASDAQ: SOLF) with Neutral ratings and targets of $34 and $14.

MOST NOTEWORTHY: Kenneth Cole, Tempur Pedic, Biogen Idec, Cubist Pharma and ShoreTel were today's noteworthy initiations:

• B. Riley started shares of Kenneth Cole (NYSE: KCP) with a Neutral rating and $21 target, citing a lack of near-term catalysts and the challenging environment for footwear companies.
  
• William Blair resumed coverage of Tempur Pedic International (NYSE: TPX) with an Outperform rating, and finds the current valuation attractive for long-term investors.
  
• Banc of America assumed coverage of Biogen Idec (NASDAQ: BIIB) with a Neutral rating and $79 target, as they see less than 50% probability of a sale at current prices and expect shares to trade back to pre-announcement levels in the mid-to-high $60s if no sale is made.
  
• Cubist Pharmaceuticals (NASDAQ: CBST) was initiated with a Sector Performer rating at CIBC, citing competitive headwinds.
  
• ShoreTel (NASDAQ: SHOR) was initiated with a Neutral rating at Nollenberger on valuation.

OTHER INITIATIONS:

• UBS initiated CVS Caremark (NYSE: CVS) with a Buy rating and Rite Aid (RAD) and Walgreen (WAG) with Neutral ratings.
  
• Caris initiated Starent Networks (NASDAQ: STAR) with an Average rating and $23 target.

MOST NOTEWORTHY: American Eagle, CVS/Caremark, Office Depot, WPP Group and Pixelworks were today's noteworthy upgrades:

• American Eagle Outfitters Inc (NYSE: AEO) was upgraded to Outperform from Market Perform at Wachovia, as the firm believes momentum from a strong Spring/Summer can carry into the fall/Holiday seasons.
  
• JP Morgan views CVS/Caremark Corporation (NYSE: CVS) as the most sophisticated healthcare offering, the largest PBM, and has first mover advantage. The firm upgraded shares to Overweight from Neutral.
  
• JP Morgan also upgraded shares of Office Depot Inc (NYSE: ODP) to Overweight from Neutral based on valuation and potential turnaround.
  
• Morgan Stanley upgraded WPP Group (NASDAQ: WPPGY) to Overweight from Equal Weight as they believe the company can still meet its profit forecasts and margin goals in a slowing global economy.
  
• Jefferies upgraded shares of Pixelworks Inc (NASDAQ: PXLW) to Hold from Underperform on valuation as they no longer believe the risk/reward favors shorting at these levels.

OTHER UPGRADES:

• Stifel upgraded Tempur Pedic International (NYSE: TPX) to Buy from Hold.
  
• Merrill upgraded Tyco Electronics (NYSE: TEL) to Buy from Neutral.
  
• BB&T upgraded Celanese Corporation (NYSE: CE) to Buy from Hold.
  
• CIT Group Inc (NYSE: CIT) was upgraded to Outperform from Neutral at Credit Suisse.

MOST NOTEWORTHY: Patterson-UTI Energy, Nabors Industries, US Steel Group, Cooper Companies and Continental AG were today's noteworthy upgrades:

• Bernstein upgraded Patterson-UTI Energy Inc (NASDAQ: PTEN) and Nabors Industries Limited (NYSE: NBR) to Outperform from Market Perform citing valuations and secular growth trends.
• Citigroup upgraded US Steel Corporation (NYSE: X) to Buy from Hold and raised their target to $118 to reflect operating catalysts and their expectations for domestic steel markets to improve in Q4 and 2008.
• Cooper Companies Inc (NYSE: COO) was also upgraded to Buy from Hold at Citigroup despite the lowered guidance as they believe the company's products are improving and earnings upside is possible.
• WestLB upgraded Continental AG (OTC: CTTAY) to Buy from Hold after the tire marker announced plans to reorganize its company structure into six divisions following the purchase of Siemens AG's (NYSE: SI) VDO automotive unit.

OTHER UPGRADES:

• Tempur Pedic International (NYSE: TPX) was upped to Sector Outperformer from Sector Performer at CIBC World Markets.
• Friedman Billings upgraded shares of Stone Energy Corporation (NYSE: SGY) to Outperform from Market Perform.
• Deutsche Bank upgraded shares of Occidental Petroleum Corporation (NYSE: OXY) to Buy from Hold.
• Fifth Third Bancorp (NASDAQ: FITB) was raised to Market Perform from Underperform at Bernstein.

MOST NOTEWORTHY: The energy & petroleum sector, BP PLC, BG Group, Check Point and ValueClick were today's noteworthy upgrades:

• Bernstein upgraded Talisman Energy Inc (NYSE: TLM) to Outperform from Market Perform on valuation and potential exploration success in Vietnam and raised Anadarko Petroleum Corporation (NYSE: APC), Devon Energy Corporation (NYSE: DVN) and EOG Resources Inc (NYSE: EOG) to Market Perform from Underperform on improving gas fundamentals.
• Bernstein also upgraded shares of BP PLC (NYSE: BP) and BG Group (NYSE: BRG) to Outperform from Market Perform.
• Check Point Software Technologies (NASDAQ: CHKP) was upgraded to Outperform from Market Perform at Friedman Billings, citing checks that indicate a strong product cycle for the company's beefed up VPN/firewall product portfolio.
• ValueClick (NASDAQ: VCLK) was upgraded at Citigroup to Buy from Hold on valuation, as they believe the recent correction provides a compelling entry point.

OTHER UPGRADES:

• Merrill Lynch upgraded shares of Alcoa Inc (NYSE: AA), Alumina Ltd (NYSE: AWC) and Century Aluminum Company (NASDAQ: CENX) to Buy from Neutral and shares of Southern Copper Corporation (NYSE: PCU) to Neutral from Sell.
• JP Morgan upgraded shares of Tempur Pedic International (NYSE: TPX) to Overweight from Neutral.
  
• Infineon Technologies (NYSE: IFX) was upgraded to Outperform from Neutral at Credit Suisse.

Commercialization of technologies developed for the space program has led to a wide variety of interesting and useful products. Among them are the well-publicized offerings of a firm headquartered in Lexington, Kentucky.

Tempur-Pedic International (NYSE: TPX) makes bedding materials, featuring a visco-elastic foam that was designed by NASA to help cushion astronauts during liftoff. Offerings include pillows, mattresses, adjustable beds and cushions. The company markets its products through furniture and department stores, medical retailers, hospitals and the Internet. They are sold under the brand names TEMPUR and Tempur-Pedic. About a third of Tempur-Pedic's revenue comes from international sales.

The company pleased investors last week when it reported Q2 EPS of 39 cents and revenues of $257.6 million. Analysts had been looking for 35 cents and $244 million. Management also guided FY07 EPS to $1.63-$1.66 ($1.56 consensus) and FY07 revenues to $1.065-$1.085 billion ($1.06B consensus). The CEO cited Q1 price increases and additional moves planned for Q3, in discussing the good results and favorable outlook. The company also announced a new $200 million share buyback. The stock popped on the news and is now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

OptionXpress Holdings Inc. (NASDAQ: OXPS) -- volume & volatility Elevated on renewed buyout speculation. OXPS is recently up $0.87 to $26.47 on renewed buyout speculation. OXPS call option volume of 3,911 contracts compares to put volume of 33 contracts. OXPS August option implied volatility of 47 is above its 26-week average of 39 according to Track Data, suggesting larger price fluctuations.

Select Comfort Corp. (NASDAQ: SCSS) -- calls active on unconfirmed Tempur Pedic International Inc. (NYSE: TPX) buyout speculation. SCSS, a personalized sleep product company, is recently up $0.15 to $17.49. TPX has been frequently mentioned as interested in acquiring SCSS assets over the last three years. SCSS has a market cap of $854 million with zero long term debt. SCSS had March quarterly 2007 revenue of $216 million. TPX has a market cap of $2.4 billion. SCSS call option volume of 3,011 contracts compares to put volume of 174 contracts. SCSS August option implied volatility of 42 is above its 26-week average of 39 according to Track Data, suggesting slightly larger price fluctuations.

Option volume leaders today are: Research in Motion (NASDAQ: RIMM) and Apple Inc. (NASDAQ: AAPL).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

MAJOR PAPERS:

• The Financial Times (subscription required) wrote that Citigroup Inc (NYSE: C) has shaken up its top management structure, giving senior status to executives outside New York in a move to recognize the bank's growth prospects abroad.
• Barron's Online's (subscription required) "Weekday Trader" was positive on Teva Pharmaceutical Industries ADS (NASDAQ: TEVA), writing that despite challenges in 2007, the company could win back its crown.

OTHER PAPERS:

• The Globe and Mail reported that DaimlerChrysler AG's (NYSE: DCX) Chrysler Group will eliminate 20%, or 2,000, of its 10,000 jobs in Canada.
• According to French paper Les Echoes (in French), Alcatel-Lucent ADS (NYSE: ALU) is expected to announce 12,000-13,000 job cuts, or more than 15% of its work force.
• Technology website CNet.com reported that Microsoft Corporation (NASDAQ: MSFT) will release Windows 6, the latest software for powering mobile phones, on Monday.
• Investor's Business Daily's "New America" column was positive on bed manufacturer Tempur-Pedic International Inc (NYSE: TPX), which makes visco-elastic foam mattresses. The company has been able to stay in front by doubling its R&D and increasing its ad spending.

MOST NOTEWORTHY: Alternative Energy and Tempur Pedic (TPX) top today's list of initiations.

• Citigroup initiated Evergreen Solar Inc. (NASDAQ: ESLR), SunPower Corp. (NASDAQ: SPWR) and Suntech Power Holdings (NYSE: STP) with Buy ratings and Energy Conversion Devices Inc. (NASDAQ: ENER) with a Hold rating.
• Tempur Pedic International Inc. (NYSE: TPX) was initiated with a Buy at First Albany. The firm is positive on plans for increased national distribution and expanding the company's manufacturing capacity.

OTHER INITIATIONS:

• Morgan Keegan initiated Microsemi Corp. (NASDAQ: MSCC) with a Market Perform, citing near-term softness and lack of visibility for the company.
• The Banc of America initiated certain Business Services stocks. In the consulting space, the firm initiated Watson Wyatt Worldwide Inc. (NYSE: WW) with a Buy and Resources Connection Inc. (NASDAQ: RECN) with a Neutral. In the staffing space, the firm initiated MPS Grp Inc. (NYSE: MPS) and Labor Ready Inc. (NYSE: LRW) with Hold ratings.

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