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Upgrades & Downgrades: Predicting Fewer Profits for Oracle


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

On the eve of this, the year's darkest day, and with the Yuletide fast approaching, equities got early boosts from both the Land of the Midnight Sun and a country many claim came up with Christmas. A first Swedish interest rate cut since 2009 twinned with an unexpected improvement in German business sentiment to set an upbeat tone, and the Santa Claus rally accelerated after US housing starts rose 9.3% to a 19-month high in November. The Dow Average (^DJI) rose 337.32 points as a result, albeit on predictably light volume, bouncing back from Monday's mauling to again turn positive for the month. Financials fared better, with JPMorgan Chase (JPM) the best of the blue chip banks. The American Giving Awards it recently sponsored may have drawn a minuscule audience but the financial firm likely couldn't give a hoot with its stock jumping 4.92%. After characters from The Empire Strikes Back stormed Nasdaq at the open, the Kaiser struck back, with Kaiser Aluminum (KALU) surging 6.93% in a strong commodity sector. Apple Inc (AAPL), which rose even amid Monday's broader market debacle, increased another 3.59% amid a patent win and high hopes for its television project. Of course, as our Scandinavian friends assured us over a quarter of a century ago, the sun always shines on TV. It certainly shined on Canadian Solar (CSIQ), which wakes up on this winter solstice after a Nasdaq-topping 33.48% advance.

Prestige Brands (PBH), meanwhile, maker of Dramamine motion tablets to fight sea sickness, gained 20.04%. Carnival (CCL) cruises could certainly use some, after its earnings imploded an unlucky 13% on rising fuel prices. Still, sympathy should be in short supply after the allegedly luxury liner apparently served its stricken passengers Spam. Really, is it any wonder that the Coast Guard was just compelled to announce restrictions on the capacity of oceangoing vessels amid an explosion in American waistlines? And Red Hat (RHT) got run over by a reindeer. The largest seller of an open-source operating system known as Linux, named after an engineer from Lapland, tumbled 8.90% to post the S&P 500′s poorest performance due to an earnings miss. The eponymous inventor, Linus Torvalds, is famous for saying "Software is like sex: it's better when it's free" and unless the Raleigh-based company rallies considerably from current levels, his stock options may soon be complimentary also. Still, at least there's no reason for Red Hat to be green with envy at rival Oracle (ORCL), which is tumbling 10% as we speak after an horrific fiscal Q2. Today in economics, consensus calls for an increase in November existing home sales at 10:00 a.m. Eastern. On the corporate front, expect earnings out of Actuant (ATU), Bed Bath & Beyond (BBBY), CarMax (KMX), Finish Line (FINL), KB Home (KBH), Luby's Inc (LUB), Micron (MU), Herman Miller Inc (MLHR), Shaw Group (SHAW), Steelcase (SCS), Tibco Software (TIBX) and Walgreen (WAG) are all due to report results.


Autos: Ford Motor (F) and General Motors (GM) are both begun with Buys at Sterne Agee. See also GM Deals Saab Death Blow.

Auto parts: Sterne Agee has new Neutrals on Delphi Automotive (DLPH), Johnson Controls (JCI), and Lear (LEA), and assigns Buys on both Borg Warner (BWA) and TRW Automotive (TRW).

LED-related stocks: Veeco Instruments (VECO) and Aixtron (AIXG) are each new Holds at Needham. It assigns a more bullish Buy on Cree, Inc (CREE). With the stock down 70% over the last 12 months on sector weakness, they believe now is a good time to own this marquee name before evidence of LED adoption becomes apparent and drives the share price higher.

Healthcare sector: Cantor Fitzgerald begins Buys on Coventry Health Care (CVH) ($38 objective), Centene (CNC) ($47.50), and Molina Healthcare (MOH) ($27.50). It has Holds on Amerigroup (AGP) ($60) and WellCare (WCG) ($55).

Pep Boys – Manny, Moe & Jack (PBY): Shares are picked up with a Buy rating and $14 price objective at The Benchmark Company, which believes that over the next couple of years it should be able to drive revenue and earnings through increasing market density and gaining leverage on its existing infrastructure.

Deutsche Telekom (DTEGY.PK): The stock, which trades over-the-counter here under ticker symbol DTEGY, is reinstated with an Underperform rating and €8.5 target price at Credit Suisse after the abandonment of AT&T's (T) proposal to buy its T-Mobile unit. Competitive threats "can catch T-Mobile in the crossfire and [are] likely to spill over from fourth-quarter 2011 into 2012," the analyst wrote in a note.

Beam Inc (BEAM): Bank of America-Merrill Lynch launches Buy rated coverage on the recent beverage spin-off.

Embraer SA (ERJ): The business jet manufacturer is initiated with an Outperform at Cowen & Company.

Pacific Drilling (PACD): Morgan Stanley starts shares at an Overweight.

LRR Energy L.P. (LRE): Oppenheimer launches Outperform rated coverage ($24 price target) on a company it says is attractively valued.

NewLink Genetics (NLNK): The small cap stock is established at Outperform ($10 target) by Robert W. Baird. The brokerage says catalysts include positive existing Phase II data.

Chesapeake Granite Wash Trust C (CHKR): Shares are initiated with Market Perform with Wells Fargo and a new Neutral at Goldman Sachs.

Soft drink stocks: Key Dow component Coca-Cola (KO) is reinstated with a Buy at Bank of America-Merrill Lynch, which launches Neutral rated research on rival Dr Pepper Snapple (DPS).


Research In Motion (RIMM): The battered BlackBerry maker, subject of takeover talk and whose shares are trading at their lowest level since January 2004, gets a Buy-from-Hold boost at ThinkEquity. Also read Apple's App Store Now Worth More Than All of RIM.

Lloyds (LYG): The British bank is lifted by an unusual 180 degrees, to Outperform from Underperform, at BNP Paribas. Shares are trading sharply higher in London this morning as a result.

Hershey Foods (HSY): The confectionary company gets lifted to Buy from Neutral at Bank of America-Merrill Lynch.

Amphenol (APH): APH is taken to Top Pick from Outperform at RBC Capital.

Cobalt International Energy (CIE): Goldman gives CIE a Buy-from-Neutral boost.

EZCORP, Inc (EZPW): Shares are now Neutral from Underperform at Sterne Agee.

Fusion-io (FIO): The data storage stock is increased to Neutral from Underperform, also at Sterne.

Polycom (PLCM): Citigroup raises its rating to Buy from Neutral.

Ultra Petroleum (UPL): The oil outfit gets a Buy-from-Hold hoist at Canaccord.

Coca-Cola Enterprises (CCE): Shares are increased to Buy from Hold at Argus, which says it is well-positioned to benefit from sponsorship of the upcoming London Olympics and Euro 2012 Soccer events.


JPMorgan Chase (JPM): The Dow member is moved to Neutral from Buy at Sterne Agee.

AT&T (T): The stock, cut by JPMorgan yesterday, has no time to bask in schadenfreude at its fellow Dow component's expense today, as the telecom titan is itself taken to Hold from Buy at Argus this morning.

Oracle (ORCL): The troubled software maker is cut by both Canaccord (Hold from Buy) and Crédit Agricole (Underperform from Buy.)

Ralcorp Holdings (RAH): Life's not so sweet for the Honey Bunches of Oats maker, moved to Neutral from Buy by UBS.

Financials: After yesterday's 22.88% surge Jefferies Group (JEF) gets downgraded to Market Perform from Outperform at Keefe Bruyette, which cuts Cullen/Frost Bankers (CFR) to Underperform from Market Perform.

Healthcare companies: Health Net (HNT) and Coventry Health Care (CVH) are each cut to Sell from Hold by Deutsche Bank.

Teradata (TDC): TDC is taken to Perform from Outperform at Oppenheimer amid concerns it is encountering an increasingly challenging selling environment.

TreeHouse Foods (THS): Shares are now Underperform from Neutral at Bank of America-Merrill Lynch.

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