Analyst Upgrades

• Philip Morris (PM) to conviction buy from buy at Goldman.
• Peet's Coffee (PEET) to neutral from sell at Janney Capital.
• Cephalon (CEPH) to equal weight from underweight at Morgan Stanley.
• StoneMor Partners (STON) to outperform from neutral at RW Baird.
• Tibco (TIBX) to buy from underperform at BofA/Merrill.
• Apollo Group (APOL) to outperform from market perform at BMO Capital.

Kohl's (KSS - option chain) shares are rising today after the company reported Q4 earnings this morning, posting a profit of $493 million, or $1.66 per share, on revenue of $6.04 billion. Both numbers matched analysts' estimates. KSS forecast Q1 earnings of 68 to 73 cents per share on revenue of $4.20 to $4.28 billion. Analysts have forecast earnings of 72 cents per share on revenue of $4.19 billion. KSS also initiated a quarterly dividend of 25 cents per share, the first in the company's history, which is always something that investors love to see. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on KSS.

Retailer Kohl's Corp. (KSS) shares have retreated slightly since hitting a high near $58, but just look on that dip as an opportunity to scoop up shares.

Kohl's is a retail sector winner amid the most challenging economic conditions for retailers in decades.

Kohl's same-store sales will likely increase about 5% to 6% in this year, FY2012, along with decent traffic. Kohl's also plans to open about 40 new stores. How many other retail chains are opening stores in a big way in 2011? Very few.

Analyst Upgrades

• Diamond Offshore (DO) to conviction buy from sell and Baker Hughes (BHI) to buy from neutral at Goldman.
• Frontier Communications (FTR) to outperform from market perform at Wells Fargo.
• Syntel (SYNT) to outperform from market perform at Wells Fargo, to buy from hold at Deutsche Bank and to buy from neutral at Janney Capital.
• Kulicke & Soffa (KLIC) and Fiserv (FISV) to outperform from perform at Oppenheimer.
• 3M (MMM) to neutral from underweight and Tyco (TYC) to overweight from neutral at JPMorgan.
• Collective Brands (PSS) and Nordstrom (JWN) to overweight from equal weight, as well as Foot Locker (FL) to equal weight from underweight, at Morgan Stanley.
• Amazon.com (AMZN) to buy from hold at Lazard Capital.
• Yamana Gold (AUY) to outperform from neutral at Credit Suisse.

This week, JCPenney (JCP), Kohl's (KSS) and Macy's (M) are the first of the major retailers to report results for the most recent quarter.

Macy's launched an American Express credit card and increased its mobile presence during the fiscal fourth quarter. The analysts surveyed by Thomson Reuters forecast Macy's earnings for that period come to three cents per share, which compares to a net loss of three cents per share in the same period of last year. The Cincinnati-based department store operator is expected to post revenue of $5.6 billion for the three months that ended in October, which is 5.2% more than a year earlier. For the full year, the forecast calls for earnings of $1.50 per share (+6.7%) and $8.2 billion in revenue (+4.3%). Macy's earnings results have been better than expected in recent quarters by a penny or a few per share.

Retailer Kohl's (KSS) has announced that its September same-store sales increased 3%. While this is generally good news, the increase was short of the expected increase of 3.3%. On the other hand, the company's total sales increased a respectable 5.3%.

The company also announced Thursday that it believes it will hire more than 40,000 associates during the holiday season. This estimate is a 20% increase over last year's holiday hiring (33,000 employees). These employees will work at stores, distribution centers, and credit operations, averaging 20 hours per week. Perhaps this means that the company expects to do a bit more selling this year.

I first wrote about Kohl's (KSS) on April 28, 2009, at a price of $43.82, and shares of the retailer have retreated in bear-hug fashion this summer after hitting a high near $59. Typically, that would be a danger sign, but I'm sticking with the play. Here's why.

Look for Kohl's same-store sales to increase 5% to 6% in this year, FY2011, after a roughly flat FY2010.

Kohl's is a moderate-price retailer that held its own during the recession, and will now benefit from increased spending per customer, as Americans gradually increase dollars allocated to optional, retail purchases.

The one-year chart for Kohl's (KSS) isn't impressive. Traders certainly made some money from the pattern, but longer-term investors probably aren't too pleased. And if they aren't pleased about that chart, then they certainly aren't too happy about this afternoon's price action.

The stock is down over 3% at the time of this writing, coming in at a quote of $46.28. The sell-off is backed by substantial volume. More bad news, sorry to say: the shares are closer to the 52-week low of $45.29 than they are to the 52-week high of $60.89. Considering the pullback, should we now look at the retailer as an attractive bet?