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Time to Pop in Some Sara Lee Shares

Sara Lee's

( SLE) earnings report was actually not as bad as first reported. If you back out some charges, the company actually beat EPS estimates by 2 cents. Sales rose 12 percent to $3.51 billion with the help of a weaker dollar and price increases.

Management is affirming 2009 earnings per share numbers of 90 cents to 98 cents per share. The company is currently trading at 14 times earnings, and has a 2.89% dividend yield, based on last night's closing stock price of $14.52.

We are upgrading the shares of Sara Lee to our Recommended list. We believe that rising commodity costs may start to dissipate, which would benefit profit margins, and more importantly, the shares of Sara Lee.

Smith & Nephew Reaches $1 Billion in Sales for First Time

Medical device maker

Smith & Nephew

(SNN) - Get Smith & Nephew Plc Report

has achieved its first billion-dollar quarter ever, on a 23% rise in revenue. The company is reporting solid performance across all its divisions.

The Reconstruction unit delivered revenue growth of 8%. Orthopaedic Trauma had 5% revenue growth. Its Endoscopy division had double-digit growth. The company reaffirmed its full-year guidance as well, with consensus estimates set for an EPS of $3.53 for next year.

We are beginning to warm up to SNN shares a bit, but we're holding off on adding the name to our "Recommended" list. The company's shares are in the middle of its 12-month trading range of $52-$68 and are trading at 18 times 2009 estimates. We'd like to see the shares' reaction to the quarter and monitor the news flow a bit more. The company has a dividend yield of 1.33%, based on last night's closing stock price of $55.58.

Martin Marietta Materials Faces Construction Destruction

Martin Marietta Materials

(MLM) - Get Martin Marietta Materials, Inc. Report

is feeling the hurt from rising commodity costs as hard as any company we have covered. The company's clients are having a tough time with the escalating costs and, when possible, have made the choice to defer work in anticipation of potential future cost reductions.

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For any company, news like this is frightening. The company sells gravel and other construction aggregates to construction companies across the country. The good news for MLM is that energy costs are beginning to drop. The hard job will be to get customers to resume "business as usual" and convince them that "normal" prices are coming sooner rather than later.

We feel it's best to hold off on MLM shares for a bit. Let's see if the stock can sustain above recent lows. If it does, we'll consider upgrading the name to our "Recommended" list. MLM has a dividend yield of 1.27%, based on last night's closing stock price of $108.85.

Nothing Good in AIG's Latest Report


(AIG) - Get American International Group, Inc. Report

has a lot of work to do. The company's recent earnings report is loaded with big losses, the biggest one being in its portfolio of credit default swaps, which are tied to risky mortgage debt. Total losses in that portfolio alone could be as high as $8.5 billion.

This was the company's third consecutive quarterly loss of at least $5 billion. Some analysts are speculating about a company breakup for AIG. The one thing we clearly see is the breakup should be between AIG and investors, after reading this report.

Clearly, we would avoid AIG shares here. No reason to pick a bottom when the story is this confusing. We would look elsewhere in the financial sector, names such as

PNC Bank

(PNC) - Get PNC Financial Services Group, Inc. Report


US Bancorp

(USB) - Get U.S. Bancorp Report

, to name a few.

Advance Auto Parts Defies Auto Industry Slowdown

Advance Auto Parts

(AAP) - Get Advance Auto Parts, Inc. Report

just reported a revenue increase of 5.6% to $1.24 billion in its latest earnings report. Same-store sales increased 2.9%, even better than last year's 1.2% increase in the same time period.

Management has the commercial sales side buzzing, as that division posted a 13.5% increase. Shares are up an amazing 30% in the last 12 months. These solid numbers were achieved in a very tough economic environment.

We are thus adding shares of Advance Auto Parts to our "Recommended" list. The dividend yield of 0.57% (based on last night's closing stock price of $42.03) is on the low side, so we think AAP shares are best bought on pullbacks, if possible. We are certainly impressed with the company's outperformance in this tough economic period.

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This article was written by a staff member of