Analyst's Notes. Argus Recommendations

Transcription

1 Report created Sep 13, 2017 Page 1 OF 6 Apple manufactures PCs, MP3 players, smartphones, tablet computers, software and peripherals for a worldwide customer base. Its products include the Macintosh line of desktop and mobile PCs, the ipod MP3 line, the iphone, the ipad, and various consumer products, including Apple TV. Apple also owns and operates itunes, the world's largest vendor of recorded music. Apple derives 40%-45% of its revenue from the Americas, 20%-25% from Europe/MEA, 12%-16% from Asia-Pacific, and 15%-18% from its own retail stores. Analyst's Notes Analysis by Jim Kelleher, CFA, September 13, 2017 ARGUS RATING: BUY Accelerating innovation cycle Apple celebrated the 10th anniversary of iphone with the launch of multiple new models, including the iphone 8, iphone 8 Plus, and iphone X (pronounced 'ten'). Augmented reality (AR) features, and the ARKit SDK released to developers earlier this year, should enable an entire new eco-system of games, apps and services that will enrich Apple's non-hardware revenue over time. Some wags suggested that Apple priced iphone X at $999 only to make the iphone 8 & 8 Plus seem inexpensive. Apple, in our view, has offered significant advances that position the company for a better-than-average upgrade cycle for iphones for 2017 based on early progress with AR, and with some important catch-ups in wireless charging and battery life. INVESTMENT THESIS BUY-rated Apple Inc. (NGS: AAPL) celebrated the 10th anniversary of iphone with the launch of multiple new models, one of which costs more than $1,000. The new iphone X, iphone 8 and iphone 8 Plus all have attractive new features along with important catch-ups to Android, including wireless charging and better battery life. Some features anticipated last year, such as 3D sensing, are present in modified form in the most expensive iphone iteration. iphone X has augmented reality (AR) features, including advanced facial recognition, that for now set it apart from other premium smartphones. AR, and the ARKit SDK released to developers earlier this year, should enable an entire new eco-system of games, apps and services that will enrich Apple's non-hardware revenue over time. The premium iphone X is clad in edge-to-edge OLED display, with a 5.8' viewing area that is the largest ever for iphone. All the new devices pack an A11 processor, which will improve performance and download speeds. And all the new models come with wireless Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) Rating EPS ($) Target Price: $ Week High: $ Week Low: $ Closed at $ on 9/8 Quarterly Annual ( Estimate) ( Estimate) Revenue ($ in Bil.) Quarterly Annual ( Estimate) ( Estimate) FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sept BUY HOLD SELL Argus Recommendations Twelve Month Rating SELL HOLD BUY Five Year Rating SELL HOLD BUY Rating Weight Under Over Weight Weight Argus assigns a 12-month BUY, HOLD, or SELL rating to each stock under coverage. BUY-rated stocks are expected to outperform the market (the benchmark S&P 500 Index) on a risk-adjusted basis over the next year. HOLD-rated stocks are expected to perform in line with the market. SELL-rated stocks are expected to underperform the market on a risk-adjusted basis. The distribution of ratings across Argus' entire company universe is: 49% Buy, 45% Hold, 6% Sell. Key Statistics Key Statistics pricing data reflects previous trading day's closing price. Other applicable data are trailing 12-months unless otherwise specified Overview Price $ Target Price $ Week Price Range $ to $ Shares Outstanding 5.17 Billion Dividend $2.52 Overview Technology Rating OVER WEIGHT Total % of S&P 500 Cap % Financial Strength Financial Strength Rating HIGH Debt/Capital Ratio 40.4% Return on Equity 35.0% Net Margin 20.9% Payout Ratio 0.27 Current Ratio 1.35 Revenue $ Billion After-Tax Income $46.65 Billion Valuation Current FY P/E Prior FY P/E Price/Sales 3.72 Price/Book 6.28 Book Value/Share $25.62 Capitalization $ Billion Forecasted Growth 1 Year EPS Growth Forecast 8.33% 5 Year EPS Growth Forecast 13.00% 1 Year Dividend Growth Forecast 10.09% Risk Beta 1.16 Institutional Ownership 60.71%

2 Report created Sep 13, 2017 Page 2 OF 6 charging, which is long overdue given the 'pin fatigue' that seems to greatly diminish effectiveness of lightning cords after a few months. Some wags suggested that Apple priced iphone X at $999 only to make the 8 & 8 Plus seem inexpensive. Apple charges a lot for its devices and sets the performance bar high. For that reason, new iphone generations lacking a significant 'wow' factor risk triggering a selloff in the shares. At the same time, the installed base has become so big that even 'regular' device upgrade cycles trigger huge new device volumes, regardless of critical and popular reception of the latest iteration. Fiscal 3Q17 revenue reflected continued negative comps in China. We believe the new phones (particularly the 8/8 Plus) will prompt a strong upgrade cycle in China and worldwide, which would be felt partly in the current fiscal 4Q17 but most notably in fiscal 1Q18 (ended December 2017). Although the stock is well ahead of the market and peers year-to-date, we believe that Apple's positives are not fully reflected in the share price. AAPL continues to look attractive at current levels on measures including relative P/E and discounted free cash flow valuation. We are reiterating our BUY rating to a 12-month target price of $185 (raised from $175). RECENT DEVELOPMENTS AAPL is up 39% year-to-date in 2017; the peer group of computing, storage & information-processing companies in Argus coverage is up 9%. AAPL is also running ahead of the XLK technology SPDR and all Argus-covered technology hardware names, which are up 22% and 12%, respectively. AAPL rose 10% in 2016, slightly lagging the 12% gain for the peer group. In 2015, AAPL fell 5% (after holding a 12% gain as of early November), its first down year in a decade, while the peer group declined 16%. AAPL shares rose 38% in 2014, ahead of the peer group's 16% gain and the 11.4% capital appreciation (13% total return) for the S&P 500. On 9/12/17, Apple used the venue of its new headquarters to launch new iphone models timed to the 10th anniversary of the first iphone. Investors were tipped by an inadvertent software leak to expect three new iphone models, rather than the anticipated one new model and 'S' upgrades to iphone 7 and 7 Plus. Arguably, iphone 8 and 8 Plus do not reflect the design innovation that would normally earn them a new number. CEO Tim Cook paid homage to founder Steve Jobs, noting that his influence continues to permeate Apple culture and products. COO Jeff Williams moved on to a discussion of Apple Watch. By far the most anticipated new watch feature is that Watch Series 3 comes with LTE available, using the same phone number as your phone. You can make calls even if you left your phone at home (but who does that). LTE opens numerous possibility beyond telephony, such as streaming songs while in public places where WiFi is unavailable. With a dual-core processor on board, Siri can talk to you from your Series 3 Watch. The new phone is also available in multiple new colors and wristbands, with orders Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) Revenue 156, , , , ,639 COGS 87, , , , ,376 Gross Profit 68,662 64,304 70,537 93,626 84,263 SG&A 10,040 10,830 11,993 14,329 14,194 R&D 3,381 4,475 6,041 8,067 10,045 Operating Income 55,241 48,999 52,503 71,230 60,024 Interest Expense -1,088-1,480-1,411-2,188-2,543 Pretax Income 55,763 50,155 53,483 72,515 61,372 Income Taxes 14,030 13,118 13,973 19,121 15,685 Tax Rate (%) Net Income 41,733 37,037 39,510 53,394 45,687 Diluted Shares Outstanding 6,617 6,522 6,123 5,793 5,500 EPS Dividend GROWTH RATES (%) Revenue Operating Income Net Income EPS Dividend Sustainable Growth Rate VALUATION ANALYSIS Price: High $ $82.16 $ $ $ Price: Low $58.43 $55.01 $70.51 $92.00 $89.47 Price/Sales: High-Low P/E: High-Low Price/Cash Flow: High-Low Financial & Risk Analysis FINANCIAL STRENGTH Cash ($ in Millions) 13,844 21,120 20,484 Working Capital ($ in Millions) 5,083 8,768 27,863 Current Ratio LT Debt/Equity Ratio (%) Total Debt/Equity Ratio (%) RATIOS (%) Gross Profit Margin Operating Margin Net Margin Return On Assets Return On Equity RISK ANALYSIS Cash Cycle (days) Cash Flow/Cap Ex Oper. Income/Int. Exp. (ratio) Payout Ratio The data contained on this page of this report has been provided by Morningstar, Inc. ( 2017 Morningstar, Inc. All Rights Reserved). This data (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. This data is set forth herein for historical reference only and is not necessarily used in Argus analysis of the stock set forth on this page of this report or any other stock or other security. All earnings figures are in GAAP.

3 Report created Sep 13, 2017 Page 3 OF 6 starting on 9/15/17 for availability on 9/22/17. For existing owners and Series 3 Watch buyers, Apple offered new apps aimed at sports and activity. The COO cited 'smart activity coaching, a completely redesigned workout app, and new features for swimmers.' The heart rate app has also been upgraded. Apple Watch detects arrhythmia, which makes it a more practical health monitor even if you are not a gym rat. Watch OS4 will be available 9/14/17. The cellular-enabled, 'Dick Tracey' model starts at $399, while non-cellular Watch starts at $329. Another new iteration displayed was the new Apple TV, which offers 4K HDR. This technology has been broadly available from competitor products. The newest Apple TV uses an A10X processor and a new version of tvos. After these buildups, Apple CEO Cook returned to the stage to talk about iphone and its rich history. Phil Shiller followed to provide detail on iphone 8 and 8 Plus, confirming that there will be no 'S' upgrade of 7 & 7 Plus. iphone 8/Plus offers glass front and back and comes in silver, space gray, and gold. The glass design, which has a seven-layer color process, is steel-reinforced and is 'the most durable ever in a smartphone.' The phones are sealed for water and dust resistance. A 'True Tone' display adapts color and temperature to ambient light, while the stereo speakers are 25% more powerful than those in iphone 7/Plus. The processor is the A11 'Bionic,' a 6-core, 64-bit chip that is, again, the most powerful ever in a smartphone and 25% faster than A10. An Apple-designed GPU is 30% faster than the GPU in A10. This supports the Apple-designed 12 MP camera featuring low-light autofocus, optical image stabilization and improved pixel processing. The Plus version has an upgraded telephoto function. Apple iphone finally offers wireless charging, enabled by the phone's glass back. Most features in 8/8 Plus, however, merely extend the multi-year tradition of 'better processor, better GPU, better camera.' The 8 family iphones also generally look like the 7 family and share engineering specs, in a break from past patterns when new numbers meant new design elements in the phone body. Phil Shiller really caught the audience's attention when 'augmented reality' appeared on the screen. Although this is not the first smartphone featuring augmented reality, Apple's ability to build an eco-system around AR may be its chief differentiator. Apple introduced ARKit to the SDK (software development kit) community in summer 2017, and we expect an army of developers to move on to this new challenge. All the elements in iphone 8/Plus are designed to support AR. The cameras are calibrated for AR, aided by new accelerometers (gyroscopes) and sensors to improve motion tracking. The A11 CPU and GPU are also tuned for AR and for ARKit developers. The company showed multiple games built for Apple's AR capability, generating excitement in the audience and across the blogosphere. iphone 8/8 Plus appears to be a reasonably good upgrade over the 7 family, particularly with AR and wireless charging. Memory options are significantly advanced, with the base model at 64 GB Peer & Industry Analysis The graphics in this section are designed to allow investors to compare AAPL versus its industry peers, the broader sector, and the market as a whole, as defined by the Argus Universe of Coverage. The scatterplot shows how AAPL stacks up versus its peers on two key characteristics: long-term growth and value. In general, companies in the lower left-hand corner are more value-oriented, while those in the upper right-hand corner are more growth-oriented. The table builds on the scatterplot by displaying more financial information. The bar charts on the right take the analysis two steps further, by broadening the comparison groups into the sector level and the market as a whole. This tool is designed to help investors understand how AAPL might fit into or modify a diversified portfolio. P/E Value HPQ HPE IBM 5-yr Growth Rate(%) AAPL Growth 5-yr Net 1-yr EPS Cap Growth Current Margin Growth Argus Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating AAPL Apple Inc 830, BUY IBM International Business Machine 135, BUY HPQ HP Inc 32, BUY HPE Hewlett Packard Enterprise Co 21, HOLD Peer Average 255, P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital

4 Report created Sep 13, 2017 Page 4 OF 6 and the higher-end model at 256 GB. The iphone 8 starts at $699; the iphone 8 Plus at $799; and both are available beginning 9/22/17. The iphone X is pronounced 'ten,' with the X serving as Roman Numeral. iphone X offers super retina display and the highest pixel density in any phone. The device has an edge-to-edge screen and no home button; you open the device with an upward swipe from the bottom. The cameras offer True Depth (3D sensing) and dual optical image stabilization. The phone is unlocked via facial recognition, using the True Depth camera system at the top of the screen. Tech geeks will be interested to know that when you look in the phone it projects 30,000 invisible infrared dots, forming a pattern that the camera uses to check against a stored image. Because it is checking against a 3D image, facial recognition cannot be fooled by a photo. It cannot even be fooled by one of those 'faceless man' masks from GoT; Apple built masks to test the technology. Whereas touch ID can be hacked 1 in 50,000 times, facial recognition is vulnerable 1 in 1,000,000 times. The processor inside iphone X is the A11, the same as in 8 family phones. iphone X uses the same wireless charging pad as the 8 family; Apple will introduce a multi-device charging mat, called AirPower, in iphone X comes with 64 GB memory standard for $999; it also comes in a 256 GB version for $1,099. The device can be pre-ordered beginning 10/27/17, with shipments starting on 11/3/17. Apple, which formerly offered 3 or at most four iphone models, will offer eight at least for the upcoming holiday season. These include iphone SE (from $349), 6S & 6S Plus (from $449), iphone 7 and 7 Plus (from $549), along with 8, 8 Plus, and X. we could see Apple phasing out the 6 family phones by mid Pundits and wags immediately weighed in on the marketing strategy behind launching the three new devices all at once. Some are suggesting that Apple, which always priced in the premium tier, has created an ultra-premium tier at least partly to make the 8 family phones appear 'inexpensive.' Based on the early availability of iphone 8 in comparison to iphone X, we expect the 8 family to sharply out-sell the X model - and that is likely what Apple envisioned. Apple is effectively 'dangling' the technology advancements in X to owners of lesser models, knowing these users will stay in the iphone eco-systems while waiting to enjoy that technology on next year's models. When you consider how users actually use their phone, many of the new features are nice - better processing, better cameras etc. - but not in and of themselves essential upgrades. After all, Apple executive were equally hysterical two years ago about the prior generation of devices. We think many users would strain to detect notable differences between the enhanced cameras and processing power of the new devices compared with 'pretty great' existing devices. Moving beyond those as-ex RECENT DEVELOPMENTS pected upgrades, several features this time represent real advances. Wireless charging catches up with Android. The early iteration of 3D sensing created by the True Depth camera system enables facial recognition. But it also enables an AR experience that we believe is superior to anything on Android. Moreover, the combination of Apple's closed eco-system and ARKit SDK will likely make for better AR apps compared with Android, where software developers wrestle with multiple hardware systems uneasily joined across a common OS. New iphone generations lacking a significant 'wow' factor risk triggering a selloff in the shares. At the same time, the installed base has become so big that even 'regular' device upgrade cycles trigger huge new device volumes, regardless of critical and popular reception of the latest iteration. Estimates of iphone's installed base vary, while tending to coalesce in the million range. At any time, about half that base represents phones that are more than two years old. Apple and its carrier partners now offer financial incentives, such as discounting on data plans, to encourage owners to pay full price per device via monthly payments that are spread over two years. The older than two year base is thus a meaningful upgrade driver, even if iphone's new features generate a collective 'meh.' And we do not believe 'meh' is the case this time. In summary, Apple in our view has offered significant advances that position the company for a better-than-average upgrade cycle for iphone for EARNINGS & GROWTH ANALYSIS For all of FY16, revenue of $215.6 billion declined 8% from $233.7 billion in FY15. Apple earned $8.28 per share for FY16, which was down 10% from $9.19 per share for FY15. For 4Q17, Apple guided for revenue of $49-$52 billion, which at the $50.5 billion midpoint would be up 8% annually. At the revenue guidance midpoint, sales would be about $1.3 billion ahead of the $49.2 billion pre-reporting consensus. Gross margin was guided at 37.5%-38.0%; operating costs at $6.7-$6.8 billion; total other income of $500 million; and taxes at 25.5%. Based on those inputs, we expect Apple to earn about $1.85 per diluted share in 4Q17, which would be up about 10% annually; that number was also in line with the pre-reporting consensus. We will await early returns data before tweaking (if necessary) our iphone shipment estimates, which currently stand at 216 million units for the September 2017 fiscal year (up 2%) and 238 million for fiscal 2018 (up 9%). While awaiting early returns, we are also maintaining our FY17 and FY18 EPS estimates. We reiterate our fiscal 2017 forecast for Apple of $8.97 per diluted share, which is within 1% of consensus. Our fiscal 2018 EPS forecast remains $11.50 per diluted share, which is aggressive compared with the $10.89 consensus. With no significant adjustments, events or charges in any period, our GAAP and non-gaap earnings estimates are identical. Our long-term EPS growth rate forecast for AAPL is 13%. FINANCIAL STRENGTH & DIVIDEND Our financial strength rating on Apple is High, the top of our five-point scale. Cash was $262 billion at 3Q17. Cash was $237.6 billion at the end of fiscal 2016, $206 billion at the end of fiscal 2015, or $35.50 per share. Cash & investments were $155.3 billion at the end of FY14, $146.7 billion at the end of FY13, and $121 billion at the end of FY12. Debt was $108 billion at 3Q17, compared with $87.0 billion at the end of fiscal Over the past two years, Apple levered up in anticipation of more aggressive capital allocation. Debt was $64.5 billion at the end of fiscal Apple increased its debt & commercial paper to $32.3 billion during the second half of FY14

5 Report created Sep 13, 2017 Page 5 OF 6 from $16.96 billion as of midyear The use of debt gives the company operating flexibility without the need to bring back cash from overseas at onerous tax rates. Approximately $137 billion, or 84% of cash, was offshore as of the end of 3Q14. Net cash was $133 billion at the end of 3Q14, up from $130 billion at the end of FY13. Cash flow from operations was $65.8 billion for fiscal 2016, down from $81.3 billion in fiscal Fiscal 2016 free cash flow was an estimated $53.1 billion, down from $70.0 billion for FY15. Cash flow from operations was $59.7 billion in FY14, while free cash flow was an estimated $50.1 billion. Cash flow from operations was $53.7 billion in FY13, $50.8 billion in FY12, $37.5 billion in FY11, $18.6 billion in FY10, and $10.2 billion in FY09. In April 2017, Apple announced a $50 billion increase in its capital return program; the company announced a similar $50 billion increment in April The company is committed to returning $300 billion to shareholders by the end of March 2019, raised from $250 billion to shareholders by the end of March In April 2015, Apple announced a $70 billion increase in its capital return program, with plans to return $200 billion to investors by the end of March Also within the new capital allocation program, Apple hiked its quarterly dividend by 10.5%, to $0.63 per share, in April In April 2016, Apple raised its quarterly dividend by 10%, to $0.57 per share; by 11% to $0.52 per share in April 2015; by 8% in April 2014; and by 15% in April In April 2012, Apple declared its first quarterly dividend. Our dividend forecasts are $2.40 for FY17 and $2.60 for FY18. MANAGEMENT & RISKS Timothy Cook has served as CEO since industry legend Steve Jobs passed away in Former Apple controller and former Xerox CFO Luca Maestri became CFO in September 2013, succeeding Peter Oppenheimer. Phil Schiller is the head of worldwide marketing, and Jon Ivey is the chief of design. Apple has a deep bench of executive, engineering and marketing talent. We think that it will continue to attract high-quality talent, both from an engineering perspective as well as in the corporate leadership ranks. The expected delay in the new iphone does carry some risk, particularly given Samsung's strong offering in its Galaxy premium-tier smartphone category. We expect minimal defections among Apple adherents, however, should iphone 8 completely miss the 2017 holiday season. While investors have criticized Apple for its close eco-system, that system does have the effect of prompting consumers to buy ipads and Macs for their system compatibility. Even more compelling to brand loyalty are Apple's services, including itunes, App Store, and icloud, as consumers do not want the cost and complexity of pulling their media libraries out of the comfortable arms of Mother Apple. We thus see limited risk from launch delays, partly offset by smoothed seasonality for FY17 and FY18. Despite its enormous revenue base, Apple continues to grow phone units and revenue at a double-digit pace. The shares are always at risk from the perception that growth could slow as the law of large numbers catches up with Apple. The company has mitigated that risk, in our view, with very aggressive shareholder return policies, which will likely remain paramount for Apple. Despite the company's growing largesse, we expect institutional investors to continue to demand more aggressive dividend growth and a larger share repurchase plan. COMPANY DESCRIPTION Apple manufactures PCs, MP3 players, smartphones, tablet computers, software and peripherals for a worldwide customer base. Its products include the Macintosh line of desktop and mobile PCs, the ipod MP3 line, the iphone, the ipad, and various consumer products, including Apple TV. Apple also owns and operates itunes, the world's largest vendor of recorded music. Apple derives 40%-45% of its revenue from the Americas, 20%-25% from Europe/MEA, 12%-16% from Asia-Pacific, and 15%-18% from its own retail stores. VALUATION AAPL trades at 17.6-times our FY17 EPS forecast and at 13.8-times our FY18 forecast; the two-year average P/E of 15.7-times is now above the five-year (FY12-FY16) trailing multiple of In a market near all-time highs, however, Apple is trading at only a slight premium to historical multiples. During the past five years, AAPL has traded at an average 14% discount to the market multiple, or at a relative P/E of The stock currently trades at a 12% discount to the market on a two-year-average forward basis, or at a relative P/E of Less net cash per share, AAPL trades at an average of 12.7-times GAAP EPS for FY17 and FY18, or at about 72% of the market multiple - at a time when AAPL is poised to deliver 18% two-year average EPS growth and is the largest single component of S&P 500 earnings. AAPL also trades at discounts to the technology hardware peer group, despite prospects for accelerating growth in FY17. We believe that a significant premium to peers is justified given Apple's ability to expand globally and to generate healthy demand for its products in every kind of economy. Our more forward-looking, two- and three-stage discounted free cash flow model renders a value north of $280 per share, in a rising trend. Our blended fundamental valuation model points to a price above $245, also in a rising trend. Appreciation to our 12-month target price of $185 (raised from $175), along with the dividend yield of about 1.4%, implies a risk-adjusted total return in mid-teen percentages, exceeding our 12-month forecast for the broad market. On September 13 at midday, BUY-rated AAPL traded at $158.98, down $1.88.

6 METHODOLOGY & DISCLAIMERS Report created Sep 13, 2017 Page 6 OF 6 About Argus Argus Research, founded by Economist Harold Dorsey in 1934, has built a top-down, fundamental system that is used by Argus analysts. This six-point system includes Industry Analysis, Growth Analysis, Financial Strength Analysis, Management Assessment, Risk Analysis and Valuation Analysis. Utilizing forecasts from Argus Economist, the Industry Analysis identifies industries expected to perform well over the next one-to-two years. The Growth Analysis generates proprietary estimates for companies under coverage. In the Financial Strength Analysis, analysts study ratios to understand profitability, liquidity and capital structure. During the Management Assessment, analysts meet with and familiarize themselves with the processes of corporate management teams. Quantitative trends and qualitative threats are assessed under the Risk Analysis. And finally, Argus Valuation Analysis model integrates a historical ratio matrix, discounted cash flow modeling, and peer comparison. THE ARGUS RESEARCH RATING SYSTEM Argus uses three ratings for stocks: BUY, HOLD, and SELL. Stocks are rated relative to a benchmark, the S&P 500. A BUY-rated stock is expected to outperform the S&P 500 on a risk-adjusted basis over a 12-month period. To make this determination, Argus Analysts set target prices, use beta as the measure of risk, and compare expected risk-adjusted stock returns to the S&P 500 forecasts set by the Argus Strategist. A HOLD-rated stock is expected to perform in line with the S&P 500. A SELL-rated stock is expected to underperform the S&P 500. Argus Research Disclaimer Argus Research is an independent investment research provider and is not a member of the FINRA or the SIPC. Argus Research is not a registered broker dealer and does not have investment banking operations. The Argus trademark, service mark and logo are the intellectual property of Argus Group Inc. The information contained in this research report is produced and copyrighted by Argus, and any unauthorized use, duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report may be derived from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. This report is not an offer to sell or a solicitation of an offer to buy any security. The information and material presented in this report are for general information only and do not specifically address individual investment objectives, financial situations or the particular needs of any specific person who may receive this report. Investing in any security or investment strategies discussed may not be suitable for you and it is recommended that you consult an independent investment advisor. Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may have issued other reports that are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judgments made on the original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention of any recipient of this report. Argus shall accept no liability for any loss arising from the use of this report, nor shall Argus treat all recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus has provided independent research since Argus officers, employees, agents and/or affiliates may have positions in stocks discussed in this report. No Argus officers, employees, agents and/or affiliates may serve as officers or directors of covered companies, or may own more than one percent of a covered company s stock. Morningstar Disclaimer 2017 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.