MOST NOTEWORTHY:

• NICE Systems (NASDAQ: NICE) was upgraded to Buy from Neutral at UBS, as they believe NICE is well-positioned to leverage its offerings in VoIP recording, call centre analytics, and other applications with its extensive enterprise customer base.
  
• Hambrecht upgraded shares of Watson Pharmaceuticals (NYSE: WPI) to Buy from Hold ahead of the company's Q4 results to reflect valuation and low expectations.
  
• Thomas Weisel upgraded Micron Tech (NYSE: MU) to Overweight from Market Weight citing expectations DRAM pricing will stabilize in 2008, potential upside from high growth DRAM segments such as mobile, and notes cost cutting efforts and valuation.

• JP Morgan added Wabtec (NYSE: WAB) to its Focus List.
  
• Keefe Bruyette raised Franklin Bank (NASDAQ: FBTX) to Market Perform from Underperform.
  
• Morgan Stanley upgraded Wyeth (NYSE: WYE) to Overweight from Equal Weight.
  
• Citigroup upgraded Mentor Graphics (NASDAQ: MENT) to Buy from Hold and added shares to its Top Picks List.

Permalink | Email this | Linking Blogs | Comments

• Veterans' Day holiday.
• Tyson Foods (NYSE: TSN) to report Q4 earnings. They are holding a conference call at 9am and a business update later at 10:45am.

• Wal-Mart Stores (NYSE: WMT) to report Q3 earnings; pre-recorded conference call at 7am.
• Home Depot (NYSE: HD) to report Q3 earnings; conference call at 9am.
• Fed Reserve Governor Randall Kroszner is the Keynote Speaker at Standard & Poor's Banking Conference in New York at 1pm.

• Fed Reserve Chairman Ben Bernanke is the Keynote Speaker at Cato Institute Annual Monetary Conference at 9:10am.
• Macy's (NYSE: M) to report Q3 earnings; conference call at 10:30am.

• Charles Schwab (NASDAQ: SCHW) to hold business update conference call at 10:30am.
• Nevada District Court: Bayer (NYSE: BAY) vs. Watson Pharmaceuticals (NYSE: WPI) on Patent Infringement Lawsuit over the generic birth control drug YAZ.

• PDUFA date for Bristol Myers Squibb Company's (NYSE: BMY) Abilify.
  
• PDUFA date for Impax Laboratories' (OTC: IPXL) Vadova.

Permalink | Email this | Linking Blogs | Comments

MOST NOTEWORTHY:

• ING Group upgraded shares of BT Group (NYSE: BT) to Hold from Sell to reflect the company's more stable revenue trend and improving cash flow generation.
  
• Deutsche Bank upgraded shares of Luminent Mortgage Capital (NYSE: LUM) to Hold from Sell, as they believe the company's portfolio is beginning to stabilize and its liquidity has improved.
  
• Goldman upgraded Cognos Inc (NASDAQ: COGN) to Buy from Neutral following its Q2 report.
  
• Thor Industries (NYSE: THO) was raised to Sector Perform from Underperform at RBC Capital Markets. The firm's checks indicate strengthening backlog and lower promotional spending.
  
• Roth Capital believes Watson Pharmaceuticals (NYSE: WPI) is about to enter a growth phase with Paul Bisaro at the helm and is positive on Silodosin potential. The firm upgraded shares to Buy from Hold.

• Bank of the Ozarks (NASDAQ: OZRK) was upgraded to Buy from Neutral at B. Riley.
  
• Bear upgraded Harman International (NYSE: HAR) to Outperform from Market Perform.
  
• Goldman upgraded Packagaing Corporation (NYSE: PKG) and Smurfit-Stone Container (NASDAQ: SSCC) to Buy from Neutral.
  
• Friedman Billings raised Conseco Inc (NYSE: CNO) to Outperform from Market Perform.

Permalink | Email this | Linking Blogs | Comments

California-based Watson Pharmaceuticals, Inc. (NYSE: WPI) posted good 1Q 2007 numbers overall. For the quarter, net revenue was $671.6 million, with net income of $31.6 million and diluted EPS of $0.29. Factoring in some of the costs of acquiring Andrx Corporation, legal costs, and debt repurchase costs, adjusted net income was $37.3 million, $0.34 diluted EPS.

Watson Pharmaceuticals includes both generic and branded divisions, both of which reported double digit revenue increases. Generic division revenue was $424.6 million, up 32% or $102.5 million. This increase was driven by the sales of Andrx products as well as the sale of oxycodone HCI controlled-release tablets, the sale of which has been halted. Also sales of oral contraceptives products increased $9.6 million to $85.6 million. The much smaller branded division boosted net revenue for the quarter by 19% to $101.5 million, an increase of $16.4 million.

These positive numbers allowed the company to make $150 million worth of debt repayments in 1Q 2007. CEO Allen Chao states that the company is well placed to expand the number of generic and proprietary products it brings to market, while at the same time controlling operating costs and seeking out additional partners. Watson Pharmaceuticals is facing a number of additional costs related to its acquisition of Andrx Corporation, including over $23 million in additional administrative costs, and several million dollars worth of inventory charges for Andrx products. Pharmaceutical companies generally will face increased costs for clinical trials.

If the company is correct in its assessment of prescriptions trends, prescription prices, and the introduction of new products, then it forecasts FY 2007 net revenue between $2.5 and $2.6 billion.

Permalink | Email this | Linking Blogs | Comments

The boon of generic pharmaceutical cost efficiency only works when the effectiveness of the generic product matches that of the original. An expert in the art of creating difficult-to-formulate and high-barrier-to-entry generic equivalents is headquartered in Canonsburg, Pennsylvania.

Mylan Laboratories (NYSE:MYL) is one of the world's leading makers of generic drugs, providing 160 products in nearly 400 strengths, covering 46 therapeutic categories. The firm is active in the development and production of sophisticated dosage forms, such as transdermal patches, extended-release tablets and capsules. It is also a leading supplier of unit dose pharmaceuticals to hospitals and other institutions. Customers include wholesalers, distributors, retail drugstore chains and government agencies. Competitors include Teva Pharmaceutical Industries (NASDAQ: TEVA) and Watson Pharmaceuticals (NYSE: WPI).

The stock is up over the past month, on word of various regulatory and legal developments that can benefit the firm. Also, there was word last week that Mylan issued upside guidance for FY07. The company now sees EPS of $1.60-$1.63, versus prior guidance of $1.50-$1.55 and Street consensus of $1.52. MYL shares popped on the news and have since been defining 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.

Brokers recommend the issue with two "buys," fourteen "holds" and one "sell." Analysts see a 15% average annual growth rate, through the next five years. The MYL P/E ratio (25.18), PEG ratio (0.90), Price to Cash Flow ratio (12.15), Price to Free Cash Flow ratio (20.98), Sales Growth rate (29.08%), EPS Growth rate (76.00%), Operating Margin (36.38%), Net Profit Margin (23.89%), Return on Assets (17.13%), Return on Investment (19.82%), Return on Equity (37.20%) and Net Income per Employee ($119.39k) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 65% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $18.65 and $23.49. A stop-loss of $19 looks good here. Note that the firm is expected to announce fiscal fourth quarter results in mid-May.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

Permalink | Email this | Linking Blogs | Comments

The U.S. markets bounced back after yesterday's sell-off following the Chinese example. Indexes were mildly up across the board. Fourth quarter GDP was revised down from 3.5% to 2.2%. January new home sales also fell 143,000, or about 15%. I had the feeling that investors paid little attention to the economic data and were more just glued to their screens watching the market action.

The NYSE had volume of 3.8 billion shares with 2,111 issues advancing while 1,204 declined for a loss of 45.13 to 9,124.54. On the NASDAQ, 2.6 billion shares were traded, 1,667 stocks advanced and 1,398 declined for a gain of 8.27 to 2,416.13.

Stocks on the move included Watson Pharmaceuticals Inc (NYSE:WPI), down $1.71 (-6%) to $26.36 on earnings. Chicago Mercantile Exchange Holdings Inc. (NYSE:CME) is up $28.16 to (5%) to $539.15.

Options volume was still very heavy, but lighter than yesterday. Six million puts and 5.6 million calls traded for a put call ratio of 1.08. This put/call ratio is higher than normal as investors continued to pick up some extra insurance after yesterday's down action. We have seen lots of option activity on Domtar Inc. (NYSE:DTC) over the last few days and now Weyerhaeuser Co. (NYSE:WY) is also up in the top 10 with the March 95 calls (WYCS) trading over 51,000 contracts and the March 95 puts (WYOS) trading over 49,000 contracts. This activity is the result of the coming merger between the two companies. The CBOE Volatility Index -- the market's fear meter -- jumped from 11.15 to 15.42. after yesterday's sell-off.

The Kevin Kersten is an analyst with InvestorsObserver. DISCLOSURE NOTE: Mr. Kersten owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.

Permalink | Email this | Linking Blogs | Comments

• Overstock.com to report Q4 earnings, conference call at 11am.
• PDUFA date for Watson Pharmaceutical Inc's (NYSE: WPI) Actoplus XR for non-insulin dependent diabetes mellitus.

• Nike Inc (NYSE: NKE) to hold Analyst Day at 12pm. Credit Suisse First Boston believes Nike will announce the rollout of a specialty retail store concept at the meeting.

• Equinix (NASDAQ: EQIX) to report Q4 earnings; conference call at 5:30pm. Kaufman Brothers notes that the company's last overhang was removed in the middle of January and it sees a $93 price target on the stock.
• PDUFA Date for Roche Holding's (OTC: RHHBY) Cera for chronic renal disease.

• Monthly sales reports reports due from Abercrombie & Fitch Co (NYSE: ANF), Limited Brands (NYSE: LTD), Nordstrom, Inc (NYSE: JWN) and Wal-Mart Stores Inc (NYSE: WMT).
• Gateway to report Q4 earnings; conference call at 5:30pm.

• Corning Incorporated (NYSE: GLW) to hold Investor Meeting at 9am with presentations from its CEO and CFO.

Permalink | Email this | Linking Blogs | Comments

Permalink | Email this | Linking Blogs | Comments

Watson Pharmaceuticals, Inc. (NYSE:WPI) recently announced its acquisition of Andrx Corp., a pharmaceutical company that has many generic offerings. Many have suggested that this is a crucial move for Watson, which has seen its profit margins shrinking over the past year. While Watson will only enjoy about two months of Andrx revenues in 2006, the company hopes the acquisition will give it some economies of scale and improve profitability in the coming years.

Watson is the third largest company in the generic business, and it also has several branded products, particularly for bladder problems, pain relief and anemia. These products haven't been doing as well of late, however, so revenue growth has come primarily from its lineup of generics.

This could be a problem for Watson going forward: while it can continue to offer more generics as patents expire in coming years, competition has driven down pricing in the generic market, which is a big reason why profit margins haven't been so strong lately. There's been talk since election day that the Democratic Congress will push to limit patents and make generics more accessible. While this may help, it may also end up being canceled out if the Dems, as expected, revise the Medicare bill to allow the government to negotiate drug prices for Medicare.

A company like Watson may be hardest hit by these changes. It has to maintain its research and selling costs, but it's not big enough to spread out these costs. (It's main rivals in the generics industry, Teva and Sandoz, Inc. are four times as large.) Nor is it small enough to be content focusing on a few niche markets.

While I think Watson is a solid company, I think the waters are too uncertain to be a safe pick right now.

Type of stock: A medium-sized pharmaceutical company that makes most of its money off generic drugs.

Price Target: At $25, Watson is closer to the low end of its 52-week range. It bottomed out during the summer and has bounced back a bit, but I don't see enough hope in the Andrx acquisition to recommend buying right now.

Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.

Permalink | Email this | Linking Blogs | Comments