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Upgrades & Downgrades: Mattress Stock Awakes to Stellar News


Wall Street ratings agencies set the tone for today's stock market.

Trading in a tight range, stocks staggered to a split decision amid a tug-of-war between better than expected consumer confidence and continuing evidence that home prices remain in the doldrums. Dow Industrials (^DJI) snapped a four session winning streak to decline 0.02% while the S&P 500 Index ended up 0.01% on the lightest full day volume of 2011. We saw the softer side of Sears (SHLD), with the company whose name once graced the world's tallest tower sliding 27.20% to an almost 3-year low. This as Bank of America (BAC), whose pricey new Big Apple home is New York's second highest edifice after the Empire State Building, tumbled 2.14% and Time Warner (TWX), whose Manhattan headquarters are the most expensive real estate in the entire city, incurred an analyst downgrade. Those British scientists who spent the summer of 2010 - when they might have been better advised to employ their talents investigating the effects of BP Plc's (BP) oil spill -determining that the chicken came before the egg may now wish to reconsider. Yesterday, poultry processor Pilgrim's Pride (PPC) lost 1.17% even as egg producer Cal-Maine Foods (CALM) rode impressive earnings to gain an even 4.44%. (Presumably then the eggs in question were laid by four Colly Birds as opposed to three French Hens; two Turtle Doves, or indeed a Partridge in a Pear Tree.)

Eight is apparently an extremely lucky number in China although I'd stay away from eight maids-a-milking if I were you, after Beijing admitted its inspectors found elevated levels of a carcinogen in a batch of the pasteurized beverage. Not that Walgreen (WAG), which invented the malted milkshake in 1922, fared much better after falling 5.60%. Elsewhere oil's ongoing rally sent it back above $100 a barrel after Iran threatened trouble in the Straits of Hormuz. At least the Tehran-born, mischief-making, BMW-punching CEO of Life Time Fitness (LTM) should be able to keep his temper in check after its shares advanced an even 3.00% to a fresh 52-week. A Barron's boost sent shares of Gap Inc (GPS) gaping up 2.42% in shades of its jump-'n-jive late 1990s heyday, if Jive Software (JIVE), which gave up 3.48%, will excuse the analogy. And OfficeMax (OMX) retreated a further 2.58%, taking its year-to-date loss to 74.1%. Investors are about ready to tell the retailer to go Elf Itself. No top-tier economic data out today, but corporate earnings are expected to include Diamond Foods (DMND) and Piedmont Natural Gas (PNY).


Mattress Firm Holding Corp (MFRM): Barclays begins covering the stock at an Overweight while UBS and KeyBanc Capital both assign Buys, the latter with a $28 target price. Keybanc highlights a compelling strong unit growth opportunity, which should propel 20% plus Earnings Per Share growth over the next three to five years. This in turn justifies a 20 times multiple on its 2013 estimate of $1.42.

Utilities: NSTAR (NST) and Northeast Utilities (NU) are each initiated Overweight by Barclays.

Cascade Corporation (CASC): CASC gets picked up with a Buy recommendation and $60 price objective at Global Hunter Securities, which cites an impressive ability to generate meaningful free cash flow through the full business cycle.

Manning & Napier (MN): The investment management outfit is a new Outperform at Wells Fargo and started with a Buy and $15 target at Stifel Nicolaus, which says catalysts include a unique direct sales platform that effectively penetrates the high net worth, retirement, and small case institutional market.


Specialty Eateries: Starbucks (SBUX) is upgraded to Buy from Neutral at DA Davidson, which takes Dunkin Brands (DNKN) to Neutral from Underperform. Also read 10 Comeback Companies for 2012.

Endeavour International (END): Shares are up sharply before the opening bell this morning after Rodman & Renshaw raised its recommendation to Outperform from Market Perform with a $12.50 target price following its U.K. North Sea acquisition. The brokerage believes shares should outperform in 2012 on strong, oil-weighted production growth.


Kodiak Oil & Gas (KOG): KOG is cut to Market Perform from Outperform with a $10 target at Northland Securities due to valuation concerns. For more on the sector, see What 2012 Could Look Like for Iran and the Oil Markets.

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