Zacks Broker Upgrades: Deere & Co., Dell, Abbott, Network Appliance and St. Jude Medical

CHICAGO--(BUSINESS WIRE)--Studies have shown that broker upgrades lead to short-term outperformance. Stocks recently upgraded by brokerage analysts include Deere & Company (NYSE: DE), Dell Inc. (NASDAQ: DELL), Abbott (NYSE: ABT), Network Appliance, Inc. (NASDAQ: NTAP) and St. Jude Medical, Inc. (NYSE: STJ). To learn more about how you can profit from broker upgrades, visit: http://at.zacks.com/?id=139.

Here is a synopsis of stocks with recent broker upgrades:

Deere & Company (NYSE: DE) recently reported solid fiscal fourth quarter results despite rather weak market conditions in many parts of the world. The farm and industrial equipment maker watched its Average Broker Recommendation increase to 2.00 over the past week. Earnings per share of $1.20 beat the consensus by more than 26% and advanced year over year from 96 cents. Worldwide net sales and revenues increased 3% to $5.12 billion.

Analysts believe the long-term outlook of Deere & Company is inextricably linked to a strong recovery in farm equipment businesses, introduction of new products and cost-reduction efforts. According to Zacks Research Digest, the company has the ability to increase margins through cost initiatives, productivity improvements and higher product realizations. Furthermore, Deere is focused on improving cash flow by reducing working capital.

Dell Inc.’s (NASDAQ: DELL) Average Broker Recommendation advanced to 2.46 after reporting preliminary fiscal third-quarter results. The Zacks #1 Rank company announced earnings of 30 cents per share, bettering the consensus by 25%. Revenues advanced to $14.4 billion. Dell said it achieved a better balance of liquidity, profitability and growth, which was driven by an improved mix of products worldwide. Furthermore, the company continued to focus its actions to strengthen product lines

Analysts believe international sales will be an important catalyst for growth over the next several years and the company’s success in what it calls “tier 1” opportunities, which are based on growing penetration of industry standards, or hardware commoditization, and include Servers, Storage and Services. Potentially important in 5-10 years is the company’s success in what it calls “tier 2” opportunities that include printers, networking, and PDAs.

While consensus agrees Dell will continue to take share and maintain industry leading margins in its core PC business, this business is seen as maturing and currently accounts for over 60% of revenue. Cautious analysts believe early signs of a spending recovery are already priced in, with only a few analysts questioning its potential success in tier 1 and 2 growth opportunities. For Dell’s long-term outlook, it will be important to monitor success in Server, Storage, Services, and international sales going forward, according to analysts.

Abbott (NYSE: ABT) is a global, broad-based health care company with an Average Broker Recommendation that rose to 1.87 lately. Most analysts are concerned about the generic threat to Biaxin/Biaxin XL. One firm believes that 2007 will be a difficult year for ABT as several drugs are facing generic threat and believes the Street is dramatically overestimating Abbott s true earnings power in 2007.

ABT increased its guidance for Humira sales to $2B for 2006. Revenue upside from the key drug could lead to higher EPS. Clearly Humira is the driving force on earnings in the next several years. Expanded indications can transform Humira into a multi-billion dollar drug. Humira could exceed 10% of total revenues by 2007. Yet, before getting overly excited about Humira, the analysts remind us that TAP will see a near 10% decline in income contribution. Also, generic Synthroid is here, and risk to both TriCor and Biaxin loom large. Much like the margin story at ABT, it is a mixed bag of positive and negative trends.

Network Appliance, Inc. (NASDAQ: NTAP) reported fiscal second quarter revenues of $652.5 million, which advanced 35% from $483.1 million a year earlier. Earnings per share topped the consensus by approximately 12.5%. The storage technology company said that the quarter’s results highlight its success around the world as it increases market share and expands its reach. It’s Average Broker Recommendation improved to 2.49.

Analysts like the company’s solid balance sheet, and that NTAP maintained its leadership in the Secure Content and Application Delivery market. Analysts also believe that NTAP’s market condition could improve due to favorable competitive dynamics, product transitions, technology assimilations and an evolving IBM relationship. According to Zacks Research Digest, the company’s management believes NTAP is well-positioned to capitalize in each growth area of networked storage and could again gain share and generate robust growth in FY07.

St. Jude Medical, Inc. (NYSE: STJ) recently announced that the FDA approved an innovative insulation material for cardiac leads used with pacemakers and implantable cardioverter defibrillators. Optim™ lead insulation in the first silicone-polyurethane co-polymer material created specifically for cardiac lead use. St. Jude said it is committed to developing innovative products that ease implantation, enhance safety and increase therapeutic benefits for the patient. The company’s Average Broker Recommendation recently improved and now stands at 2.30.

According to Zacks Research Digest, brokerage firms note that, over the long term, St. Jude Medical will continue to gain share in the ICD market due to its strong product line, despite a short-term slowdown in the market. Analysts also like STJ’s decision to invest in growth for 2007 and beyond, even at the expense of 2006 earnings.

About Broker Upgrades

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