This Just In: More Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock-pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given this, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about.

Today we're going to take a look at three high-profile tech moves on Wall Street: a downgrade for Heckmann (NYS: HEK) , an upgrade for Veolia Environnement (NYS: VE) , and a better price target for VIVUS (NAS: VVUS) .

What the Hek just happened?
Let's get the bad news out of the way first. Bright and early this morning, analysts at Ladenburg Thalmann announced a 180-degree reversal to sell on oil-field-services provider Heckmann. The move shocked Mr. Market, which is selling off Heckmann shares to the tune of 7% in response. Probably the worst thing for investors, though, is that we have no idea whether there's a good reason for this sell-off.

Ladenburg hates Heckmann now. But why? Not a single major media outlet has details on the downgrade. Even our friends at, usually in the know about these kinds of things, tell us only that Ladenburg cut the stock to "sell" and cut its price target in half -- from $7 all the way down to $3.25 per share. We can only surmise, though, that Ladenburg sees significant danger in the numbers Heckmann will announce when it reports first-quarter earnings on Thursday.

If that's the reason for the downgrade, then Ladenburg is right to worry. Competitor Key Energy (NYS: KEG) just reported weak earnings last week, and Heckmann may not do much better. Unprofitable over the past year (and each of the past four years, in fact), Heckmann hardly seems a successful business. With significant debt on its balance sheet, Heckmann is also a notorious cash-burner, reporting nearly $165 million in negative free cash flow last year.

In short, the stock seems to have risk in spades. With Ladenburg -- an analyst with a 63% record for accuracy in the oil and gas industry -- now going negative on it, investors are right to worry.

Don't worry -- Ve happy
One stock investors needn't worry about, though, is French waste management firm Veolia Environnement -- at least, that's what England's HSBC thinks. The British banker upgraded Veolia to "overweight" this morning. And while no one seems to have details on the whys and wherefores, in Veolia's case there is at least a good numbers-based argument in favor of optimism. You just have to dig for it a little.

At first glance, Veolia looks like anything but a buy. The stock carries a $7.4 billion market cap, but according to its GAAP numbers it's deeply unprofitable and likely to earn so little next year that its forward P/E ratio is north of 18.

This sounds bad, but consider: If you dig into Veolia's cash-flow statement, what you'll find is that Veolia actually generated $686 million in positive free cash flow last year. That makes for just an 8.3 price-to-free-cash-flow ratio on the stock -- a stock most analysts expect to grow profits at better than 15% per year over the next five years. Best of all, with a strong 10% dividend yield to its credit, Veolia should be able to reward investors even if it does not grow not at all. Sounds like a buy to me and HSBC both.

Veni, vidi, VIVUS?
Last but not least, we come to VIVUS, which wowed investors last week with its Friday announcement that the FDA had approved its Stendra erectile-dysfunction drug. That news lifted VIVUS's stock price 3% Friday, capping a 10% run-up for the week. And according to boutique investment banker MLV & Co, there's more where that came from.

Raising its price target to $34 (a 13% increase), MLV sees the potential for a near-40% profit for investors who buy VIVUS today. Is that likely?

It's hard to say. Unprofitable today -- revenue-less today, for that matter -- VIVUS shares cost infinitely more than its nonexistent profits and sell for 55 times the profits Wall Street hopes it might earn next year. That seems a little pricey, relative to consensus analyst projections of 30% long-term profit growth -- and even more when you consider that Pfizer (NYS: PFE) could lose patent protection on Viagra any day now, unleashing a horde of cheap, generic ED drugs onto the market. Whether VIVUS would be able to make any headway in the market under that scenario is up for debate.

In short, while MLV's promised profit of 40% is possible, I'd say it's far from guaranteed. My advice: Hold until we see some evidence that VIVUS can find a market.

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Whose advice should you take -- mine, or that of "professional" analysts like Ladenburg, HSBC, and MLV? Check out my track record on Motley Fool CAPS and compare it to theirs. Decide for yourself whom to believe.

At the time thisarticle was published Fool contributorRich Smithdoes not own shares of, nor is he short, any company mentioned above. He does, however, have public recommendations available on more than 50 separate companies. Check them out on Motley Fool CAPS, where he goes by the handle "TMFDitty" -- and iscurrently ranked No. 360 out of more than 180,000 CAPS members. The Motley Fool has adisclosure policy.The Motley Fool owns shares of Heckmann.Motley Fool newsletter serviceshave recommended buying shares of Veolia Environnement and Pfizer. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.

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