Friedman Billings notes last night DRIV posted softer-than-expected 3Q08 results, as the co experienced sluggish business trends in the last few weeks of the quarter on the heels of a weakening macro backdrop. Given the weakening trends that DRIV is seeing in its business, the co gave a cautious outlook for 4Q, which came in below firm's and Street expectations. While ests will come down across the Street this morning, and some may be surprised by the lack of sequential growth in 4Q, firm applauds DRIV for taking its medicine now and lowering the bar in light of a challenging environment. Strategically speaking, firm believes DRIV is well positioned to take market share over the next 12 to 18 months, with the co expanding its product tentacles into other higher growth markets. Firm cuts tgt to $27 from $30.
Upgrades: SunTrust upgrades Sterling Bancshares (SBIB 7.22) to Buy from Neutral and sets a $10 tgt, based on valuation despite higher credit costs following Q308 EPS that missed firm and consensus estimates... Deutsche Bank upgrades Invitrogen (IVGN 25.05) to Buy from Hold and maintains their $32 tgt, based on valuation... Credit Suisse upgrades Manulife Financial (MFC 18.40) to Outperform from Neutral... Deutsche Bank upgrades Tuesday Morning (TUES 1.57) to Hold from Sell...Calyon upgrades Airtran Holdings (AAI 3.40) to Add from Neutral... J.P Morgan upgrades Odyssey Healthcare (ODSY 7.57) to Neutral from Underweight.... J.P Morgan upgrades Douglas Emmett (DEI 13.150) to Overweight from Neutral. Downgrades: Calyon downgrades Southwest (LUV 11.12) to Reduce from Neutral... J.P Morgan downgrades Alexandria Real Estate (ARE 69.07) to Neutral from Overweight. Miscellaneous: Morgan Stanley initiates Nasdaq (NDAQ 29.32), CME Group (CME 263.64) with Equal Weights... Morgan Stanley initiates NYSE Euronext (NYX 25.59) with an Underweight... Morgan Stanley initiates IntercontinentalExchange (ICE 64.30) with an Overweight.
Upgrades: SunTrust : Citigroup upgrades Hellenic Telecom (OTE 6.06) to Buy from Hold... Jefferies upgrades Sierra Wireless (SWIR 7.51) to Hold from Underperform and lowers their tgt to $8.50 from $11, based on shares trading at 1.0x cash with positive cas flow following Q308 revenue and GAAP EPS reported below firm estimates... Jefferies upgrades Constellation Energy (CEG 23.29) to Buy from Hold and raises their tgt to $26.50 from $25, based on shares trading at a discount of approx 14.0% relative to the $26.50/share cash offer made by MidAmerican Energy.
Downgrades: KeyBanc : Piper Jaffray downgrades Acadia Pharma (ACAD 1.65) to Sell from Neutral... Piper Jaffray downgrades ZymoGenetics (ZGEN 3.00) to Neutral from Buy... Piper Jaffray downgrades Infinity Pharma (INFI 4.15) to Neutral from Buy... Piper Jaffray downgrades Exelixis (EXEL 3.01) to Neutral from Buy. Miscellaneous: Merrill initiates Apollo Investment (AINV 11.70) with a Buy.
Upgrades: Merriman upgrades Denny's (DENN 1.28) to Buy from Neutral, following Q308 core earnings that exceeded expectations and beleive the co's restructuring and successful menu and food cost management should stabilize operating margins... Deutsche Bank upgrades Coca-Cola Femsa (KOF 29.23) to Hold from Sell and lowers their tgt to $29.25 from $33, based on valuation following Q308 results modestly above expectations and continue to expect a dramatic slowdown in Q408 yet feel these risks are priced into shares... HSBC upgrades Taiwan Semiconductor (TSM 7.70) to Overweight from Neutral... Credit Suisse upgrades Veolia Environmet (VE 22.96) to Neutral from Underperform... UBS upgrades Biogen Idec (BIIB 42.35) to Neutral from Sell.
Downgrades: KeyBanc downgrades Ultimate Software Group (ULTI 15.53) to Hold from Buy, following disappointing Q308 earnings and reduced margin guidance, tempered by a strong result for new business generation... Baird downgrades SonicWALL (SNWL 4.63) to Neutral from Outperform and lowers their tgt to $5 from $8, following Q308 revenue that missed firm estimates, EPS that exceeded estimates and tempered Q4 revenue guidance... Jefferies downgrades Dominion Resources (D 37.12) to Underperform from Hold and lowers their tgt to $30 from $43.50, based on the growing need by Dominion to issue equity... Friedman Billings downgrades Aeropostale (ARO 24.46) to Market Perform from Outperform and lowers their tgt to $28 from $32, as they believe peaking sales productivity and operating margins may be difficult to improve upon in FY09.
As mentioned at 8:18, UBS downgraded SPWRA to Sell, and ESLR, ENER, and SOLR to Neutral. UBS now estimates '08 and '09 solar demand will be 4.4GW and 5GW, lower than 5.0GW & 7.3GW previously, as firm's checks suggest the German market will only be 1.5GW in both 2008 and 2009 (2GW & 3GW previously). Firm's industry research suggests the residential segment in most regions is becoming less elastic in a global recession with difficulty obtaining credit. Firm's global solar team's new 2009 solar module price estimate is $3.01/watt (-25% yoy) vs. $3.22/watt previously and compares to consensus company guidance of -10% to -15%. Firm favors FSLR given their view that the company will sustain the industry's lowest cost/watt and continued manufacturing production outperformance.
Downgrades: J.P Morgan downgrades Sherwin Williams (SHW 51.42) to Neutral from Overweight. Miscellaneous: Citigroup initiates The McClatchy Co (MNI 2.22) with a Sell... Citigroup initiates Gannett (GCI 9.13) with a Buy... Citigroup initiates New York Times (NYT 9.51) with a Sell... Merrill lowers their tgt on Cicso (CSCO 16.09) to $22 from $30.
Upgrades: J.P Morgan upgrades Choice Hotels (CHH 20.86) to Neutral from Underweight... UBS upgrades PepsiAmericas (PAS 16.20) to Buy from Neutral... UBS upgrades China Telecom (CHA 26.71) to Buy from Neutral. Downgrades: Credit Suisse downgrades News Corp. (NWS 7.88) to Neutral from Outperform... Jefferies downgrades Embarq (EQ 30.38) to Hold from Buy following the announced acquisition by CenturyTel (CTL) for $11.6 bln... Credit Suisse downgrades Ralcorp (RAH 64.33) to Neutral from Outperform... UBS downgrades Evergreen Solar (ESLR 2.39) GT Solar (SOLR 3.96) and Energy Conversion Devices (ENER 28.38) to Neutral from Buy... UBS downgrades Sunpower (SPWRA 34.68) to Sell from Neutral. Miscellaneous: Credit Suisse initiates Google (GOOG 329.49) with an Outperform... Credit Suisse initiates Yahoo! (YHOO 11.58), Amazon.com (AMZN 49.58) and eBay (EBAY 14.53) with Neutrals... Credit Suisse initiates Dish Network (DISH 15.62), DirecTV (DTV 17.95) and Time Warner Cable (TWC 18.01) with Neutrals... Credit Suisse initiates Comcasct (CMCSA 13.62) and Disney (DIS 21.37) with Outperforms.
Upgrades: J.P Morgan : Oppenheimer upgrades Integra LifeSciences (IAR 31.05) to Outperform from Perform and sets a $40 tgt, as they believe margins are set for a steady turnaround via GM improvement from $40 mln in higher margin Theken sales, a currency benefit, as the co has more costs in Euros than revenue, and discontinued products... Deutsche Bank upgrades Boardwalk Pipeline Partners, LP (BWP 20.48) to Buy from Hold... Citigroup upgrades Ryanair (RYAAY 19.62) to Buy from Hold... Citigroup upgrades British Sky Broadcasting (BSY 21.69) to Buy from Hold. Downgrades: Keefe, Bruyette downgrades AmeriCredit (ACF 5.91) to Underperform from Market Perform and lowers their tgt to $3 from $8, following a Q109 loss that was better than firm and consensus estimates and remain cautious on the co's outlook while noting an increase in the loss rate to 8.5% could trigger an event of default, increasing the chances of a bankruptcy filing, in their view... Keefe, Bruyette downgrades National City (NCC 2.02) to Market Perform from Outperform and lowers their tgt to $2.30 from $7, based on the definitive agreement for PNC Financial to purchase NCC for approx $5.6 bln, including cash payment for warrants... Baird downgrades PCTEL (PCTI 6.75) to Neutral from Outperform and lowers their tgt to $8 from $13, following Q3 revenue that was in line, EPS above expectations and tempered guidance due to lower WiMAX demand and macro concerns... Jefferies downgrades ION Geophysical (IO 5.59) to Hold from Buy and lowers their tgt to $6.50 from $16, as they believe that seismic equipment demand will be negatively impacted as customers' spending habits will turn more conservative in light of current market conditions and have concerns over the near-term financial needs that ION faces as the financing used to partially fund the ARAM acquisition expires soon.
Upgrades: Keefe Bruyette upgrades T. Rowe Price (TROW 31.47) to Outperform from Market Perform... Keefe Bruyette upgrades Lender Processing (LPS 24.16) to Outperform from Market Perform... J.P Morgan upgrades Prudential (PUK 9.20) to Overweight from Neutral. Downgrades: Keefe Bruyette downgrades Old Second Bancorp (OSBC 18.50) to Underperform from Market Perform... Merriman downgrades Rick's Cabaret Int'l (RICK 6.60) to Neutral from Buy, as they are concerned about trends at the recently-acquired Las Vegas club as well as clubs in second-tier markets and believe the stock/credit markets as well as political uncertainty could cause some acquisition hesitation by management until visibility on both fronts improves... Citigroup downgrades Alumina (AWC 5.11) to Hold from Buy... UBS downgrades U.S. Steel (X 34.68) to Sell from Buy... UBS downgrades Nortel (NT 1.23) to Neutral from Buy. Miscellaneous: Oppenheimer initiates Syniverse Holdings (SVR 15.18) with an Outperform and sets a $19 tgt, as they believe SVR is nicely positioned as rising mobile services penetration (~58% in 2008 rising to 80% in 2012), subscriber growth (~15%-30% in developing regions), and emerging next-gen hardware and applications drive mobile connections and wireless data.
Upgrades: Keefe Bruyette : Oppenheimer upgrades Juniper Networks (JNPR 16.50) to Outperform from Perform and sets a $22 tgt, as spending concerns are likely to linger near term yet believe the co has enough flexibility to deliver on earnings even in a highly constrained spending environment, expect cost controls along with aggressive share repurchases can offset any earnings downside to current '09 consensus, and believe JNPR has yet to see the full benefit of its strong product cycle... JP Morgan upgrades ChinaMobile (CHL 36.50) to Neutral from Underweight... Keefe, Bruyette upgrades Franklin Resources (BEN 55.48) to Outperform from Market Perform and maintains their $67 tgt, based on valuation... Keefe, Bruyette upgrades Greenhill (GHL 55.73) to Outperform from Market Perform and lowers their tgt to $72 from $78, following Q308 EPS that missed firm and consensus estimates and based on valuation... Keefe, Bruyette upgrades EMC Insurance (EMCI 19.10) to Market Perform from Underperform and lowers their tgt to $19 from $21, following normalized EPS (excluding catastrophe losses and reserve development) that exceeded firm normalized estimates... Baird upgrades Aqua America (WTR 14.67) to Outperform from Neutral and maintains their $19 tgt, based on valuation and believe earnings are at an inflection point following nearly three years of flattish results, with ROEs likely to trend higher following Q308 rate relief in PA, NJ and FL... Merrill Lynch upgrades Developers Diversified Realty (DDR 8.08) to Buy from Neutral.