Monday’s Top Upgrades (and Downgrades): Dean Foods Co (DF), Micron Technology, Inc. (MU), Charles Schwab Corp (SCHW)

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A 9% Yield From a "Strange" MLPThis 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 upgrades for Dean Foods Co (NYSE:DF) and Charles Schwab Corp (NYSE:SCHW), but a downgrade for Micron Technology, Inc. (NASDAQ:MU).

Bad news first
Might as well get the bad news out of the way first: The trading week got off to a poor start for Micron shareholders this morning, as Lazard Capital announced it’s downgrading the stock to neutral. A 30% surge in share price so far this year has Micron finally trading back around where it was a year ago — but no sooner has Micron evened its keel than Lazard pronounces its run… done.

Is that fair? Maybe not. But “fair” is not the point, or not to Lazard, anyway. According to the analyst, what’s key here is that “recent DRAM strength is to taper off as we enter Q2,” posing the risk of short-term earnings misses. In the longer term, “Street estimates are too bullish for FY14 and the Elpida merger.” With shares now costing somewhere “toward the high end of its historical range,” it’s time to take any profits you’ve managed to earn over the past couple of months, and wait for another pullback before buying more Micron Technology, Inc. (NASDAQ:MU).

So says Lazard — and I agree. GAAP-unprofitable today, selling for more than 16 times free cash flow and nearly 16 times projected 2014 earnings, the stock already costs a bit more than you should want to pay for 14% projected long-term earnings growth. Meanwhile, the stock’s 30% return over the past two months has already given shareholders all the profits (and more) that they’d ordinarily expect to earn in a full 12-month year. Now’s the time to “declare victory and go home.”

Dean looks smart
Better news greeted shareholders of milk magnate Dean Foods Co (NYSE:DF). KeyBanc Capital Markets initiated coverage of the company with a buy rating and a $21 price target this morning. As described the rating, KeyBanc thinks “DF is trading at a significant discount to its peers (3.5x EV/EBITDA compared to about 7x for its agribusiness peers),” and that’s an “unwarranted” discount “given DF’s stable free cash flow (FCF) generation, transformation of balance sheet to a position of strength (2x levered after adjusting for DF’s ownership stake in WWAV after adjusting for the sale compared to over 3x before), and relatively stable nature of the milk category.”

Dean’s balance sheet is only going to look better, by the way, as the company monetizes what’s left of its The WhiteWave Foods Co (NYSE:WWAV) stake, raising perhaps as much as $560 million in extra cash — enough to pay off about 18% of its debt load. And yet, try as I might, I just can’t see the attraction to this stock.

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