Thursday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines include higher price targets for Boeing (NYSE: BA  ) and Kraft Foods (NASDAQ: KRFT  ) . Meanwhile, one last analyst is...

Mopping up the enthusiasm at Heinz
It's been a month-and-a-half since news of Berkshire Hathaway's (NYSE: BRK-A  ) (NYSE: BRK-B  ) buyout of H.J. Heinz (UNKNOWN: HNZ.DL  ) became public. Six weeks after the fact, Argus Research is declaring victory and going home to count its profits. Today, the analyst removed its successful buy rating from the stock, giving investors the green light to go ahead and sell the shares and pocket their 35%, one-year profit.

This sounds like sound advice. Berkshire's Heinz acquisition may not close until the end of the third quarter, which means anyone holding the shares could be sitting on dead money for the next three months. Absent a competing, upset bid -- which is unlikely, because who other than Buffett would be crazy enough to pay 23.5 times earnings for 6.6% growth? -- all Heinz shareholders have to look forward to now is their April 10 dividend payment.

Anyone who held on to the shares through close of business on March 25 should already be entitled to that, though. If the check's not yet "in the mail," it soon will be. So as of now, there's little reason left to stick around.

Stifel spells profit "K-R-(A)-F-T"
And where should you put your money next? Well, if investing in processed foods is your thing, then the analysts at Stifel Nicolaus have an idea for you. This morning, Stifel upped its target price on Kraft Foods by about 12%, to $55 a share.

In some respects, Kraft actually looks more enticing than the Heinz shares that Buffett is buying. The company pays a 3.9% dividend. It's cheaper, too, costing less than 19 times earnings. And like Heinz, Kraft throws off mondo free cash flow -- $2.6 billion over the past 12 months, versus the $1.6 billion it reported as GAAP net income.

On the downside, though, Kraft is only growing about half as fast as Heinz, with five-year growth estimates averaging an anemic 3.4%. Is that fast enough to justify the stock's valuation, at 12 times annual cash profits? Personally, I don't think it is. But clearly, Stifel disagrees. In addition to the better price target, Stifel rates Kraft a buy.

Could Boeing shares go "boing!"?
A more interesting, non-food-related idea comes from the folks at Imperial Capital, which today upped its price target on Boeing. Continued "headline risk" at the company is keeping Imperial from actually recommending buying Boeing shares, mind you. But the analyst is raising its estimate on the shares' worth to $88.

Is Imperial right about that? Actually, they might be. I'm a recurrent Boeing pessimist myself, and I still have reservations about the company's 787 troubles (afflicted by burning batteries, delayed deliveries, and consequent penalty payment demands from its customers). That said, Boeing took a big risk off the table when it settled both of its latest labor disputes without sparking a strike. As a result, I have to admit that Boeing shares at less than 17 times earnings, and a mere 11 times free cash flow, don't look half bad to me right now.

If Boeing succeeds in growing profits at the near-14% annual rate that analysts project, and if it maintains or increases its modest 2.3% dividend yield, and if it gets its 787 situation resolved (a task made much easier now that it has engineers and technicians on the task, and not on the picket line), the stock could be a great bargain at today's prices.

That's a lot of ifs, admittedly. But at $86 and change, I think Boeing's worth the risk.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway and H.J. Heinz Company. The Motley Fool owns shares of Berkshire Hathaway.

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