Citigroup upgraded Hercules Offshore (HERO

) to buy from hold, after the company on Monday posted first quarter results.

Analyst Geoff Kieburtz says that day rate increases have been larger, while the outlook is stronger than expected for both jackups and lifeboats. He notes that insurance and labor costs are rising sharply, but he believes the company is positioned to pass most--if not all--of these increases on to customers. Additionally, he says the stock's valuation has become attractive vs. peers, and further acquisition opportunities provide upside to earnings growth. He raises his $2.80 2006 earnings per share (EPS) estimate to $2.90, and his $3.85 2007 EPS estimate to $4.60. He increases his $43 stock price target to $52.