Analyst's Notes. Argus Recommendations

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1 Report created Sep 10, 2015 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 10, 2015 ARGUS RATING: BUY New product launch highlights; reiterating $145 target Apple's new iphone 6S and 6S Plus, introduced on September 9, offer 3D Touch capabilities, an improved camera, and other enhancements. Although Apple irritated investors by keeping the baseline iphone at 16 gigs of memory, the monthly upgrade cost to 64 gigs is $4-$5, assuming the use of ever more prevalent unsubsidized leasing plans. The ipad Pro has a 12.9' screen size that takes on notebook PCs, along with a stylus (a Steve Jobs no-no), while Apple TV features Siri-based voice command software. Less $35 per share in cash, AAPL trades at an average of 7.8-times GAAP EPS for FY15 and FY16, or at about 54% of the market multiple - at a time when AAPL's 42% EPS growth for FY15 represents the principal driver of S&P 500 EPS growth. INVESTMENT THESIS BUY-rated Apple Inc. (NGS: AAPL) introduced upgrades to its immensely popular iphone 6 and 6 Plus phones on September 9, but investors gave them a big 'meh' as AAPL stock moved lower in a down market. Apple introduced its large-screen ipad Pro, which comes with a high-end stylus and appears to be targeting notebook PCs rather than rival tablets. Apple also introduced a new, Siri-equipped version of its Apple TV, though it did not announce a big-box television (not anticipated) or a video streaming service (somewhat anticipated). The S version of iphone, as anticipated, did not wow, even though CEO Tim Cook promised it was completely new on the inside. While Apple bulls pointed to 'force touch' and an improved camera on the revised iphone 6S and 6S Plus, the company disappointed investors by retaining 16 gigs of memory in its baseline model; most high-end Android smartphones now start with 32 gigs. For the first time, Apple also introduced a leasing plan for the iphone, seemingly in direct competition with the wireless carriers it has Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) 125 Rating EPS ($) Target Price: $ Week High: $ Week Low: $92.00 Closed at $ on 9/4 Quarterly Annual ( Estimate) 9.85 ( 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: 48% Buy, 47% 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 $92.00 to $ Shares Outstanding 5.70 Billion Dividend $2.08 Overview Technology Rating OVER WEIGHT Total % of S&P 500 Cap % Financial Strength Financial Strength Rating HIGH Debt/Capital Ratio 24.0% Return on Equity 41.4% Net Margin 22.6% Payout Ratio 0.22 Current Ratio 1.08 Revenue $ Billion After-Tax Income $50.74 Billion Valuation Current FY P/E Prior FY P/E Price/Sales 2.80 Price/Book 5.00 Book Value/Share $22.03 Capitalization $ Billion Forecasted Growth 1 Year EPS Growth Forecast 41.61% 5 Year EPS Growth Forecast 13.00% 1 Year Dividend Growth Forecast 9.39% Risk Beta 1.05 Institutional Ownership 59.50%

2 Report created Sep 10, 2015 Page 2 OF 6 worked with for so long. Either way, the era of the subsidized two-year plan is fading away. At the height of the market meltdown, Apple stated that its Chinese business was never better. However, investors remain concerned about the long-term impact of economic deceleration in Apple's second-biggest market. Apple has increasingly been taking share from Android, particularly in high-end smartphones. We believe that the iphone has room for more market share gains, particularly as the accelerating demise of subsidized two-year plans increases the iphone's relative attractiveness. Less $35 per share in cash, AAPL trades at an average of 7.8-times GAAP EPS for FY15 and FY16, or at about 54% of the market multiple - at a time when AAPL's 42% EPS growth for FY15 represents the principal driver of S&P 500 EPS growth. We regard the pullback in AAPL shares as nonfundamental and primarily related to broad market weakness. We are reiterating our BUY rating on AAPL to a 12-month target price of $145. RECENT DEVELOPMENTS AAPL is up 1% year-to-date for 2015, ahead of the 11% year-to-date decline for the peer group of computing & information-processing companies in Argus coverage. AAPL rose 38% in 2014, ahead of the peer group's 16% gain and 11.4% capital appreciation (13% total return) for the S&P 500. Apple rose 5% in 2013, after spending most of the year with a double-digit decline; the peer group rose 53% in After being up as much as 70% in 2012 prior to the iphone 5 launch in September 2012, Apple retraced sharply, limiting its full-year gain to 31%. AAPL shares recorded a 26% gain in 2011, compared to a 9% decline for a basket of 11 information-processing stocks in Argus coverage. AAPL rose 53% in 2010 and surged 146% in On 9/9/15, exactly a year to the day after unveiling the iphone 6 and 6 Plus, Apple showed off the new 'S' iterations of its iphone. As is typical in its preholiday product showcase, the company built anticipation for the new phones by introducing other new or upgraded products first. Investors appeared unimpressed, however, as AAPL stock moved down slightly in a downward-drifting market. As they did last September, investors may withhold their verdict on the new devices until the company reports fiscal 4Q15 results - which will capture 10 days or so of the new phones - in mid- to late October. So highly anticipated are these September launch parties that Apple was able to fill the 6,000-seat Bill Graham auditorium in San Francisco. The three main product refreshes were the ipad Pro, the upgraded Apple TV, and the S iterations of iphone. However, CEO Tim Cook first sought to position the Apple Watch in the medical device space, in addition to its fashion and fitness uses. Apple Watch also has new colors and a new wristband, resulting in multiple new configurations. As expected, the company issued no unit figures or guidance for the Apple Watch. The first real excitement was reserved for the ipad Pro, which Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) Revenue 65, , , , ,795 COGS 39,541 64,431 87, , ,258 Gross Profit 25,684 43,818 68,662 64,304 70,537 SG&A 5,517 7,599 10,040 10,830 11,993 R&D 1,782 2,429 3,381 4,475 6,041 Operating Income 18,385 33,790 55,241 48,999 52,503 Interest Expense ,088-1,480-1,411 Pretax Income 18,540 34,205 55,763 50,155 53,483 Income Taxes 4,527 8,283 14,030 13,118 13,973 Tax Rate (%) Net Income 14,013 25,922 41,733 37,037 39,510 Diluted Shares Outstanding 6,416 6,519 6,587 6,630 6,325 EPS Dividend 0.47 GROWTH RATES (%) Revenue Operating Income Net Income EPS Dividend Sustainable Growth Rate 31.2 VALUATION ANALYSIS Price: High $61, $49, $72, Price: Low $44, $33, $43, Price/Sales: High-Low - - 2, ,879.81, , , ,513.3 P/E: High-Low , ,618.48, , , ,336.4 Price/Cash Flow: High-Low , ,484.4 Financial & Risk Analysis FINANCIAL STRENGTH Cash ($ in Millions) 10,746 14,259 13,844 Working Capital ($ in Millions) 19,111 29,628 5,083 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. ( 2015 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 10, 2015 Page 3 OF 6 Mr. Cook called the biggest ipad announcement since ipad itself. ing Chief Phil Schiller stated that the 12.9' screen was better for gaming and video viewing, repeatedly contrasting it not with other tablets but with notebook PCs. The device exceeds other laptop capabilities in areas such as display quality and refresh rate, and Mr. Schiller claimed it was 80% faster than most notebook PCs. The big reveal was the stylus, called Apple Pencil. Not just a piece of plastic, it packs sensors to detect force and tilt. The product drew immediate comparisons to Microsoft Surface, and even has an optional Surface-like keyboard. The risk for Apple is that the ipad Pro competes not with Microsoft Surface or 'Wintel' notebooks, but with Apple's own MacBook Pro and MacBook Air. At about $800, ipad Pro could easily cannibalize MacBook Pro, which in many iterations ranges from $1200 to $1500. Throw in the stylus for an additional $100 and the keyboard for $170, and this product can cost more than MacBook Air, which sells for about $1,000. CEO Cook shifted gears by stating that the future of TV is apps. The new Apple TV has enhanced software content and features a voice command function hosted by Siri. The voice feature was able to search across multiple apps from Apple (itunes) and from third-party content providers (Hulu, NetFlix, etc.). With its enhanced Apps readiness, Apple TV can quickly switch from viewing to gaming and to services such as Airbnb or Uber. The new remote features a track-pad. In contrast with its success in tablets and phones, Apple has so far been unable to differentiate a product that links web content to the television. We are not sure this device will make any more headway, but Siri and the track-pad will give it their all. An hour or so into its big event, Apple finally unveiled iphone 6S and 6S Plus. Mr. Cook promised that the phone was completely new on the inside; but there were some exterior changes as well. The phones, which have some new colors such as rose gold, also have a revised aluminum casing meant to address the bending issue in iphone 6 Plus and a revised Gorilla Glass tough cover from Corning. On the inside, the S models have the A9 processor, an upgrade from A8 in the original iphone 6 and 6 Plus models. And they will run ios 9, which will also be available for older iphones as of mid-september. The biggest change is Force Touch, which Apple has rebranded 3D Touch. This feature allows more levels of interaction, but may take some getting used to as users vary the degree of pressure against the glass. The phone also has a taptic engine, borrowed from Apple Watch, that is essentially a more sophisticated vibrate feature. The new camera, with a 12 megapixel sensor, has 50% more pixels than the original 8 megapixel iphone 6 camera, and can shoot video in 4K resolution. Apple claims it works much better in low light. The front-facing camera has been upgraded to 5 megapixels. The 'Live Photos' feature blends short video clips with still pictures. 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 5-yr Growth Rate(%) IBM SNDK 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 628, BUY IBM International Business Machine 142, BUY HPQ Hewlett-Packard Co 49, BUY SNDK SanDisk Corp 11, BUY Peer Average 207, P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital

4 Report created Sep 10, 2015 Page 4 OF 6 Carriers are now promoting a leasing model in which consumers get the newest phone as soon as it comes out, but also ultimately pay full price for the phone. Carriers argue that the data pricing offered with leasing plans is lower than the pricing offered with subsidized two-year plans. For the first time, Apple offered its own leasing plan for its iphones, whereby US consumers would pay $32 a month for the 'use' of an iphone and get a new iphone every upgrade cycle (12 months), rather than waiting two years. Apple's installment plan, in our view, is in direct competition with the plans of the wireless carriers it has worked with for so long. By any measure, the era of the subsidized two-year plan is fading fast. Some investors have expressed concern that consumers will balk at paying full price for an iphone. Who in their right mind, this thinking goes, would pay the full price of $600-plus for an iphone, spread over several years, when they could formerly get the iphone for a $200 upfront payment and a two-year contract? Our reply is: who in their right mind would pay $400 or more for an Android phone, when they were formerly offered for a nominal $20 or even zero upfront along with a two-year contract? We think the shift away from subsidized two-year plans to the unsubsidized full-price leasing model actually enhances iphone's ability to gain market share. Apple disappointed investors by retaining 16 gigs of memory in its baseline iphone model; the first upgrade, to 64 gigs, costs an additional $100. Most high-end Android smartphones now start with 32 gigs. This could be an important competitive advantage for Android. With the new leasing plans in place, however, upgrading the iphone from 16 gigs to 64 gigs will cost $4-$5 per month. Because Apple's technology roadmap is so tightly examined, its upgrades are well anticipated, and Apple's multiproduct refresh offered few surprises. That does not change the fact that the iphone, operating within the ios ecosystem, is a terrific device made better. The ipad Pro may be a niche product, but the ipad is already the de facto enterprise tablet. Apple TV has yet to take over the living room, but with each iteration it gets a little closer. Although Apple at the height of the meltdown confirmed that its Chinese business was never better, investors wonder about the long-term impact of economic deceleration in its second-biggest market. Fundamentally, investors wonder if the law of large numbers dooms Apple's ability to generate double-digit unit volumes for its leading products, particularly iphone. AAPL shares fell into bear-market territory in August; during 8/24/15 intra-day trading, the stock was in the low $90s, down more than 30% from its peak closing price of $134. The stock is about flat year-to-date as investors wrestle with the challenges and opportunities i n front of the company. We regard the weakness in AAPL shares as nonfundamental and primarily related to broad market weakness. Apple sold 47.5 million iphones in fiscal 3Q15; this represented 35% annual growth that was at least three-times the rate of global smartphone growth. Based on this trend, as well as Samsung's reduced expectations for the Galaxy S6, Apple continues to take share from Android, particularly in high-end smartphones. We believe that the iphone has room for more market share gains, particularly as the accelerating demise of subsidized two-year plans increases the iphone's relative attractiveness. EARNINGS & GROWTH ANALYSIS For fiscal 3Q15 (calendar 2Q15), Apple reported revenue of $49.6 billion, which was up 33% year-over-year but down 4% sequentially from fiscal 2Q15; above the high end of management's guidance range of $46-$48 billion; and above the $49.0 billion consensus. Revenue growth of 33% in fiscal 3Q15 represented the best year-over-year growth for any quarter in fiscal 2015 and the strongest quarterly growth since 2Q12. The GAAP gross margin narrowed sequentially to 39.7% in fiscal 3Q15 from 40.8% in fiscal 2Q15, while rising from 39.4% a year earlier. Operating income totaled $14.1 billion in 3Q15, down from $18.3 billion in 2Q15 but up 34% year-over-year from $10.3 billion in 3Q14. GAAP EPS totaled $1.85 for fiscal 3Q15, compared to $2.33 in fiscal 2Q15 and $1.29 in the year-earlier quarter. Although Apple does not provide specific EPS guidance, its line-item guidance for 3Q15 pointed to EPS in the $1.75-$1.85 range. Knowing Apple's conservatism, Wall Street analysts had modeled EPS of $ and still missed actual EPS by $0.07. For all of FY14, revenue of $182.8 billion advanced 7% from $170.9 billion in FY13; diluted EPS of $6.44 rose 13% from $5.68 in FY13. For fiscal 4Q15 (calendar 3Q15), Apple guided for revenue of $49-$51 billion, which at the $50.0 billion midpoint is below the $50.9 billion prereporting consensus. Apple historically has topped its guidance by low double digits, although the 3Q15 top-line beat was 'only' 6%. Apple guided cautiously on gross margin to a range of 38.5%-39.5%, compared to 39.7% in 3Q15. The lower gross margin likely reflects costs for new product launches. Assuming Apple does no more than meet its midpoint sales guidance, fiscal 4Q revenue would be up 19% year-over-year. Our FY15 earnings estimate is $9.12 per diluted share and our FY16 forecast is $9.85. 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 $202 billion at the end of 3Q15, or $34.92 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. Cash & investments were $81 billion at the end of FY11, $65.8 billion at the end of 2Q11, $51 billion at the end of FY10, and $33.9 billion at the end of FY09. Debt was $49.9 billion at the close of 3Q15. Apple increased its debt & commercial paper to $32.3 billion during the second half of FY14 from $16.96 billion as of mid-year The use of debt gives the company operating flexibility without the need to bring 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 $67.8 billion in the first three quarters of fiscal 2015, versus $46.5 billion for the first three quarters of FY14. Cash flow from operations was $59.7 billion in FY14, versus $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. Coincident with the 2Q15 earnings release, Apple announced a $70 billion increase in its capital return program. Apple is committed to returning $200 billion to shareholders by the end of

5 Report created Sep 10, 2015 Page 5 OF 6 March That includes raising the repurchase authorization to $140 billion from an earlier $90 billion. Also within the new capital allocation program, in April 2015, Apple hiked its quarterly dividend by 11% to $0.52 per share. Previously, it raised its dividend by 8% in April 2014 and by 15% in April In April 2012, Apple declared its first quarterly dividend. Our dividend forecasts are $1.98 for FY15 and $2.18 for FY16. MANAGEMENT & RISKS Industry legend Steve Jobs, who resigned as CEO on 8/24/11, passed away on 10/5/11. Timothy Cook is the CEO; Mr. Cook ran the company effectively during Mr. Jobs' medical leave. 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. 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. INDUSTRY Our rating on the Technology sector is Over-Weight. We believe that CIOs and IT managers are becoming more accustomed to transformative technology, including mobile broadband and enterprise mobility; social networking and the explosion in bi-directional data traffic; Analytics, including Big Data and business intelligence; Cloud, including multiple variants (public, private, and hybrid); and enabling technologies such as Network Function Virtualization, Software-Defined (SD) Networking, Storage, Data Center, and Software/Platform/Infrastructure-as-a-service. Positives in the picture for information processing & computing companies include an enterprise IT 'refresh' cycle that is being driven by the Microsoft Windows 10 launch and Intel's 'Skylake' family of PC (fourth-generation Core i) and server processors. Server and storage providers stand to benefit from the battle among computing and communications companies for dominance in the enterprise data center, where virtualization and cloud enablement are prompting market-share disruption. At the same time, ARM-based micro-server architecture deployed in 'white box' servers designed and managed by cloud service providers represents real competition to Intel's hegemony. Communications infrastructure players are offering SDN and NFV to help carriers manage the explosion in network traffic related to social networking, high-bandwidth video on the network, and mobile data. Throughout technology, 'open' architectures are enabling greater interactivity, more efficient spectrum use, reduced power consumption, and higher performance. valuations remain attractive, while growth prospects remain highly positive. For the long term, we expect the technology sector to increase its weighting within the S&P 500 from the current 19%-20% level to 22%-23%, based on positive company and sector fundamentals. For individual companies, these include high cash levels, low debt, and broad international business exposure. We expect the entire sector to benefit from the transformative effects generated by new developments in technology. VALUATION AAPL trades at 12.1-times our FY15 EPS forecast and at 11.2-times our FY16 forecast; the five-year (FY10-FY14) trailing multiple is AAPL had in the past traded in line with or above the market multiple, but for the past five years it has traded at an average discount of 2%. The stock currently trades at a 16% discount to the market on a two-year-average forward basis. Less $35 per share in cash, AAPL trades at an average of 7.8-times GAAP EPS for FY15 and FY16, or at about 54% of the market multiple - at a time when AAPL's 42% EPS growth for FY15 represents the principal driver of S&P 500 EPS growth. AAPL also trades at discounts to the technology hardware peer group, despite prospects for double-digit growth in FY15 and FY16. We believe that a significant peer-group premium is justified given Apple's ability to generate healthy demand for its products in every kind of economy and to expand globally. Our more forward-looking, two-stage discounted free cash flow model renders a value north of $230 per share. Our blended fundamental valuation model points to a price above $200. Appreciation to our 12-month target price of $145, along with the current annual dividend yield of about 1.8%, implies a risk-adjusted total return exceeding our forecast for the broad market. On September 10 at midday, BUY-rated AAPL traded at $112.62, up $2.47.

6 METHODOLOGY & DISCLAIMERS Report created Sep 10, 2015 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 2015 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.