Southwest Securities ugpraded Blockbuster (BBI

) to strong buy from market outperform.

The movie rental company posted 17 cents fourth quarter earnings per share on 9.1% higher same store revenue.

Analyst Harry Katica says while fourth quarter earnings per share were a penny below his estimate, rental momentum picked up after Christmas, and has continued so far in the first quarter. In addition, Katica says a commitment to belt tightening and lower advertising should reduce operating costs, helping to partially offset an expected decline in gross margin that is a result of an increase in lower-margin retail sales.

Supported by a pickup in sales momentum, and a positive earnings per share outlook, Katica thinks a good deal of risk is eliminated. He set an $18 12-month target, based on 12 times his preliminary $1.50 2004 earnings per share estimate.