Stock Picks: Hewlett-Packard, Analog Devices

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Kinder Morgan Energy Partners LP (KMP)

Morgan Keegan upgrades to outperform

News of Kinder Morgan Energy Partners LP's better-than-expected 2010 dividend estimate prompted an analyst to upgrade his rating for the energy transportation and storage company on Tuesday.

On Monday after the closing bell, Kinder Morgan said it expects to pay out an annual cash dividend of $4.40 per unit in 2010, up from $4.20 per unit this year. Chairman and CEO Richard D. Kinder also said the Houston company expects to invest about $1.5 billion in expansions and small acquisitions in 2010.

Morgan Keegan analyst John Edwards Edwards raised his rating on the stock to outperform from market perform. He said the dividend forecast exceeded his forecast of $4.36 per unit. This translates to a $62 to $65 stock price by the end of 2010, or a 10% to 14% appreciation from Monday's close, he said, adding that the current stock value presents an attractive entry point.

Brocade Communications Systems (BRCD)

Lazard Capital keeps hold rating

Shares of Brocade Communications Systems fell Tuesday after the company said revenue for the first quarter won't be as strong as past quarters and an overall rebound isn't expected until the back end of the fiscal year.

Late Monday, the networking gear maker reported a 6% drop in fourth-quarter profit as higher costs offset an increase in revenue.

While it affirmed its outlook for fiscal 2010, which it first gave in September, Brocade said first-quarter revenue should be up 4% to 5% from the fourth quarter instead of the typical seasonal increase of 6% to 8%, said Lazard Capital analyst Ryan Hutchinson in a research note.

The second and third quarter revenue could see no increase to some lift, and a strong fourth quarter is expected. "The sequential revenue growth commentary seems to imply a significant degree of uncertainty around the company's business," said Hutchinson, who kept a hold rating on the stock.

Brocade earned $33.6 million, or 7 cents per share, in the quarter compared with $35.6 million, or 9 cents per share, a year ago. Excluding one-time items, earnings would have been 15 cents per share, beating the expectations of analysts polled by Thomson Reuters.

Revenue rose 31% to $521.8 million on strong growth in product sales helped by the company's Foundry Networks acquisition, topping analysts' $521.1 million estimate.

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