Analyst's Notes. Argus Recommendations

Transcription

1 Report created Aug 19, 2015 Page 1 OF 6 Home Depot is the world's largest home improvement retailer, with sales of $83 billion for the fiscal year ended February 1, The company, which is based in Atlanta, sells appliances, tools, paint, lumber, plumbing and electrical, garden and other home-improvement supplies in warehouse-sized stores that average 105,000 square feet. About 31% of sales came from plumbing, electrical and kitchen; 29% from hardware and seasonal; 21% from building materials and 19% from paint and flooring. The company's total selling space is about 236 million square feet. At the end of FY15, Home Depot had 2,269 stores. Approximately 28% of U.S. stores are in California, Florida and Texas. About 8% of the stores are in Canada and 4% are in Mexico. Online sales represented about 4% of the total. Analyst's Notes Analysis by Christopher Graja, CFA, August 18, 2015 ARGUS RATING: BUY Raising target by $6 to $136 as strong earnings continue On August 18, Home Depot reported 2Q EPS of $1.73, up 14%. Comparable sales increased 4.2%, which was above the consensus growth estimate of 3.6%. Online sales rose about 25% and represented about 5% of total sales. We are raising our FY16 EPS estimate to $5.35 from $5.28. This revision reflects the higher-than-expected 2Q GAAP results and contributions from the Interline acquisition, as well as a slightly higher sales forecast and a lower share count forecast than we previously projected. We are also raising our FY17 estimate to $6.05 from $6.00, representing a 13% increase from our FY16 estimate. Our revised target of $136 represents a total potential return of 13%, including the 2% dividend yield. The higher target reflects increases in our FY16 and FY17 EPS estimates, a lower share count, and an increase in our forward EBIT forecast. INVESTMENT THESIS Our rating on Home Depot Inc. () remains BUY. Increasing returns on capital, signs of improving customer service during recent store visits, rising home prices, and impressive execution of the business plan support our conviction that even after raising the operating margin by approximately 400 basis points over the last four years, Home Depot still has room to increase earnings and profitability. The trailing four-quarter return on invested capital was 24.9%, up 300 basis points from last year's second quarter. While the shares have returned more than 60% over the last two years, we see continued upside. Residential investment is still near a 66-year low, at 3.3% of GDP, and well below the average of 4.6% since Home prices are just returning to levels from Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) 125 Rating EPS ($) Target Price: $ Week High: $ Week Low: $ Closed at $ on 8/14 Quarterly Annual ( Estimate) 6.05 ( Estimate) Revenue ($ in Bil.) Quarterly Annual ( Estimate) 91.8 ( Estimate) FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Jan 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, 46% 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 $83.29 to $ Shares Outstanding 1.30 Billion Dividend $2.36 Overview Consumer Discretionary Rating OVER WEIGHT Total % of S&P 500 Cap % Financial Strength Financial Strength Rating MEDIUM-HIGH Debt/Capital Ratio 64.9% Return on Equity 79.4% Net Margin 7.9% Payout Ratio 0.44 Current Ratio 1.36 Revenue $85.40 Billion After-Tax Income $6.73 Billion Valuation Current FY P/E Prior FY P/E Price/Sales 1.87 Price/Book Book Value/Share $6.65 Capitalization $ Billion Forecasted Growth 1 Year EPS Growth Forecast 13.35% 5 Year EPS Growth Forecast 12.00% 1 Year Dividend Growth Forecast 25.53% Risk Beta 0.94 Institutional Ownership 71.95%

2 Report created Aug 19, 2015 Page 2 OF 6 about a decade ago. In addition, nearly two-thirds of U.S. homes are more than 25 years old and likely in need of upgrades and repairs. Lowe's, Home Depot's chief competitor, is seeing signs of modest home price appreciation in mid-sized markets, an increasing customer willingness to invest in home improvement, and an uptick in big-ticket projects. The National Association of Home Builders Remodeling Index indicates improving conditions. Harvard University's Leading Indicator of Remodeling Activity also points to growth, but at a slower rate in 2015 before accelerating again in early We believe that these factors point to sustainable growth for HD and Lowe's. HD exceeded its previous FY16 targets of a 12% operating margin and a 24% ROIC in FY15 - a year ahead of schedule. It expects to reach a 13% operating margin and a 27% ROIC by the end of the current FY16. Management has made store operations more efficient, redeploying the equivalent of 10 associates per store to spend additional time helping customers without increasing payroll as a percentage of sales. We believe that the company is making the necessary investments in supply chain, merchandising, e-commerce capabilities, employee training, and employee incentives to gain market share. We expect the company to be very disciplined with shareholder capital, returning excess cash to shareholders in the form of buybacks and annual dividend increases. HD clearly faces some challenges. Credit conditions are tight for home buyers and overall retail traffic remains very sluggish. However, these issues are unlikely, in our view, to impair the company's long-term ability to generate free cash flow or deploy capital effectively. We are raising our target price to $136 from $130, representing a total potential return of 13%, including the 2% dividend yield. The higher target reflects increases in our FY16 and FY17 EPS estimates, a lower share count, and an increase in our forward EBIT forecast. RECENT DEVELOPMENTS On August 18, Home Depot reported 2Q EPS of $1.73, up 14%. Excluding a $0.05 per share loss related to a 2014 data breach and a $0.07 gain from the sale of the remaining portion of HD Supply, the company earned $1.71 per share, which was in line with the average analyst estimate. Our forecast was $1.72. Second-quarter sales increased 4.3% to $24.83 billion. Our estimate was $24.76 billion. The StreetAccount consensus was $24.69 billion. The strong U.S. dollar lowered the growth rate by approximately 150 basis points. Comparable sales increased 4.2%, which was above the consensus growth estimate of 3.6%, according to StreetAccount. Comp sales at U.S. stores were up an impressive 5.7%, above the Bloomberg consensus of 4.2%. Online sales rose about 25% and Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) Revenue 67,997 70,395 74,754 78,812 83,176 COGS 44,693 46,133 48,912 51,422 54,222 Gross Profit 23,304 24,262 25,842 27,390 28,954 SG&A 15,849 16,028 16,508 16,597 16,834 R&D Operating Income 5,839 6,661 7,766 9,166 10,469 Interest Expense Pretax Income 5,273 6,068 7,221 8,467 9,976 Income Taxes 1,935 2,185 2,686 3,082 3,631 Tax Rate (%) Net Income 3,338 3,883 4,535 5,385 6,345 Diluted Shares Outstanding 1,658 1,570 1,511 1,434 1,346 EPS Dividend GROWTH RATES (%) Revenue Operating Income Net Income EPS Dividend Sustainable Growth Rate VALUATION ANALYSIS Price: High $50, $49, Price: Low $44, $46, Price/Sales: High-Low - - 1, P/E: High-Low , , , , Price/Cash Flow: High-Low - - 9, ,620.09, , Financial & Risk Analysis FINANCIAL STRENGTH Cash ($ in Millions) 2,494 1,929 1,723 Working Capital ($ in Millions) 3,910 4,530 4,033 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 Aug 19, 2015 Page 3 OF 6 represented about 5% of total sales. U.S. comps were up 3.5% in May, 5.1% in June, and 8.2% in July. All 19 of the company's geographic regions posted positive comps. Some of the strongest product categories were appliances, tools, lighting, and flooring. Comparable customer transactions at HD were up 2.5% from last year's second quarter, which is very healthy. The average comp ticket was up 1.7%. Commodity price deflation lowered ticket growth by 19 basis points. Transactions below $50 were slightly higher. Transactions above $900 rose by a strong 6.3%, helped by sales of appliances, windows, and riding mowers. Professional customers generated strong sales of power tools, compressors, commercial lighting, siding, and water heaters. The operating margin was $3.65 billion, or 14.7% of sales, which was 30 basis points below our estimate on a GAAP basis. If we adjust for the cost of the data breach, the operating margin was in line with our estimate and consensus at approximately 15%. The gross margin was 33.7%, up about 6 basis points from the prior-year period. The U.S. gross margin was helped by higher productivity in the distribution system and benefits from lower fuel costs. The gross margin was hurt by a less favorable product mix and commodity price inflation. At 19% of sales, total operating expenses were approximately 15 basis points lower than last year. The company incurred costs of $92 million related to the breach of credit-card data. Excluding these costs, expenses grew at just 35% of the rate of sales growth, better than the company's plan. Interest expense increased by $25 million dollars on higher borrowings. Investment income came in higher than we modeled due to a pretax gain of $144 million on the sale of the remaining investment in HD Supply, a former subsidiary. The trailing four-quarter return on invested capital was 24.9%, up 300 basis points from last year. Management expects to raise ROIC above 27% this year. Management continues to expect a recovery in the U.S. housing market. GDP has been slightly below expectations, but recent housing data remains positive. On the 2Q call, management cited improving housing turnover and a long-awaited improvement in household formation. EARNINGS & GROWTH ANALYSIS We are raising our FY16 EPS estimate to $5.35 from $5.28. This revision reflects the higher-than-expected 2Q GAAP results, as well as a slightly higher sales forecast and a lower share count forecast than we previously projected. Our revised estimate also reflects the acquisition of Interline Brands, a distributor of products for building maintenance, which was not included in previous guidance. Management has raised its FY16 EPS guidance to $5.31-$5.36 from its prior projections of $5.24-$5.27 and $5.11-$5.17. The previous guidance did not include Interline, which management Peer & Industry Analysis The graphics in this section are designed to allow investors to compare HD versus its industry peers, the broader sector, and the market as a whole, as defined by the Argus Universe of Coverage. The scatterplot shows how HD stacks up versus its peers on two key characteristics: long-term growth and value. In general, companies in the lower left-hand corner are more value-oriented, while those in the upper right-hand corner are more growth-oriented. The table builds on the scatterplot by displaying more financial information. The bar charts on the right take the analysis two steps further, by broadening the comparison groups into the sector level and the market as a whole. This tool is designed to help investors understand how HD might fit into or modify a diversified portfolio. P/E 300 AMZN Value NKE DG TJX HD LB GPS 5-yr Growth Rate(%) LOW Growth 5-yr Net 1-yr EPS Cap Growth Current Margin Growth Argus Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating AMZN Amazon.Com Inc 249, HOLD HD Home Depot Inc 159, BUY NKE Nike Inc 78, BUY LOW Lowe's Companies Inc 68, BUY TJX TJX Companies Inc 52, HOLD DG Dollar General Corporation 23, HOLD LB L Brands Inc 23, HOLD UA Under Armour Inc 18, BUY GPS Gap Inc 14, HOLD Peer Average 76, UA P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital

4 Report created Aug 19, 2015 Page 4 OF 6 now expects to add about a penny to EPS in the second half of the year. HD expects full-year comp sales to increase 4.1%-4.9%, up from its previous forecast of 4.0%-4.6% growth. We are raising our FY17 EPS estimate to $6.05 from $6.00, representing a 13% increase from our FY16 estimate. The increase reflects the inclusion of Interline, and assumes positive sales trends and continued share repurchases, partly offset by slightly higher interest expense. Our five-year annualized EPS growth rate estimate remains 12%. The consensus is 14%. Our forecast does not reflect future costs related to the data breach. Our gross margin estimates assume improvements in merchandising and operations, along with efforts to make the distribution and supply chain more efficient. These sources of improvement are likely to be partially offset by investments in lower prices in order to maintain and grow market share. We expect management to target a gross margin of approximately 35%. We continue to believe that the company can keep growth in expenses lower than growth in sales. We had been expecting expenses to grow at about half the rate of sales. However, we have recently become more optimistic and expect management to do slightly better than that. We also expect share repurchases to help earnings, driven by strong cash flow and the ability to increase debt while maintaining debt-coverage levels. FINANCIAL STRENGTH & DIVIDEND Our financial strength rating is Medium-High, the second-highest ranking on our five-point scale. We expect HD to increase profitability. Management is committed to maintaining investment-grade credit ratings and commercial paper ratings. We also believe that the company has the ability to generate substantial cash from operations and that its high real estate ownership represents a significant asset. At the end of the second quarter, the company had $4.9 billion of cash and short-term investments on the balance sheet. Home Depot owns about 90% of its stores, including those where the company owns a store on leased ground. Owned square footage was 210 million square feet at the end of FY15. The balance sheet listed the value of property and equipment at about $22 billion at the end of 2Q16. We believe that about 70% of the predepreciated value is in land and buildings. Goodwill, at $1.3 billion, is a relatively small part of the company's $44 billion in 2Q assets. The company repurchased $8.5 billion of its stock in FY14 and about $7 billion in FY15. It repurchased $3.1 billion in 1H16 and expects to buy back an additional $3.9 billion over the remainder of the year, for a total of $7 billion. HD's credit ratings are A and A2, which is solidly investment grade. Moody's recently raised its rating. We continue to believe there is a benefit for a cyclical and seasonal business to have A-1/P-1 short-term ratings for ready access to the commercial paper markets. Debt was about 65% of capital at the end of the second quarter. If we add the company's lease obligations of about $5 billion, fixed obligations rise to about 71% of capital at the end of 2Q16. This is now well above average for the companies we cover, but HD is making a concerted effort to boost returns on capital and to return cash to shareholders. Home Depot's goal is to keep its adjusted debt/ebitdar ratio below 2.0. We believe the ratio was slightly over 2 at the end of 2Q as a result of recent borrowings. The company made dividend payments totaling $0.90 in FY08, FY09 and FY10. HD made FY11 dividend payments of $0.945 and FY12 payments of $1.04 per share. The company intends to keep the payout at about 50% of earnings. The company paid dividends of $1.16 in FY13, $1.56 in FY14 and $1.88 in FY15. In the fourth-quarter release, the company raised its quarterly payout by 26% to $0.59 per share. Our FY16 dividend estimate is $2.36. Our FY17 estimate is $2.50. Management's guidance is for a 50% payout ratio. MANAGEMENT & RISKS Over the last several years Home Depot has benefited from outstanding leadership under Frank Blake. Effective November 1, 2014, Craig Menear, who has been with the company for 34 years, replaced Mr. Blake as CEO. Mr. Menear is the first merchant to be CEO since HD founder Bernard Marcus. Also on November 1, Marc Powers replaced Marvin Ellison as executive vice president of U.S. Stores. Mr. Powers was previously head of operations for U.S. Stores. He has been at the company since 1986 when he joined as a store associate. Mr. Ellison, who we regard highly, became CEO of J.C. Penney. We expect strong management to continue with the promotion of experienced managers, Mr. Blake handing the chairmanship to Mr. Menear, and Carol Tome remaining as CFO. One of the most interesting recent innovations is a handheld device called FIRST Phone that functions as a phone, walkie-talkie, a mobile computer, a mobile cash register, and an inventory tracking device. The related technology allows management to get better, and more timely data on how various products and areas of the store are performing. The company is now rolling out the second generation of the device. HD redesigned the cash register system so that multiple employees could work on a single cash register without having to change the cash drawer each time. This should allow HD to reduce checkout times. The company has also worked to develop smarter promotions based on data rather than instinct. We think the company is aiming to define a small number of items where it is determined to be the price leader. These will probably be products that lead to the purchase of other add-on products. The company said that there are businesses, like power tools that it will defend with aggressive pricing. We think this is important in categories that would make sense for Amazon and other online retailers to sell. We would rather see a company sacrifice some margin and remain viable and relevant, rather than letting the business erode by keeping prices high and losing market share. In the short term, the still recovering housing market represents a risk that is compounded by weak household formation and by still-tight credit conditions; however, we believe that the housing market is showing signs of improvement. Home Depot's primary competitive threat comes from its smaller rival, Lowe's. Lowe's has been able to compete and grow with stores that, in our opinion, are a little brighter and less intimidating to 'weekend warriors.' Home Depot's comparable sales have recently surpassed its competitor's as HD has made additional investments in its stores and associates. We think that the company's efforts to improve its logistics and distribution system should yield long-term benefits.

5 Report created Aug 19, 2015 Page 5 OF 6 Despite their collective size, Lowe's and Home Depot account for only about 20% of the total retail home improvement market, according to the companies' estimates. Coming up with a good benchmark of their 'market' is a bit of a challenge. We believe that investors are concerned that HD is running out of opportunities in its core market. While this concern probably increased with the company's decision to reduce store growth, we believe that the concern that HD is becoming an unfocused conglomerate has diminished now that management has focused its attention on the core warehouse stores and shown a commitment to dividend increases, share buybacks and improving capital efficiency. In our opinion, both Lowe's and Home Depot are vulnerable to weakness in the housing market. The perception of future weakness or stagnation could reduce P/E multiples, which could cause the shares to perform significantly worse than the S&P 500. If there is a sudden increase in interest rates or some other event that further hurts sales, selling prices or construction activity, we believe that Lowe's and Home Depot - and their shares - would be hurt. We believe that credit conditions are still tough and that banks are cautious with appraisal values. Lowe's believes that household incomes and employment are also major drivers of the business. While the unemployment rate has been declining, we believe that high-quality jobs remain hard to find. Many building and remodeling projects are discretionary and are being delayed based on concerns about the economy, the housing market or borrowing conditions. The company is emphasizing customer service to gain market share, particularly with professional contractors. A rough estimate is that HD and Lowe's have a combined 15%-30% of the home improvement market. We also expect HD to offer a slightly wider range of merchandise with the help of e-commerce. Cost control is another issue for HD and other big-box retailers (if they want to maintain margins). These companies need to be very skillful in managing expenses and healthcare costs and in minimizing in-store accidents. We think HD and LOW have both done a pretty good job maintaining service levels through the recession. The company is involved in a number of legal issues that are discussed in the annual report. More recently HD is the target of litigation related to the data breach. The company is unable to estimate the costs related to the breach. While the theft of customer data could hurt shopper confidence and sales, comp sales and traffic remained strong following the theft. COMPANY DESCRIPTION Home Depot is the world's largest home improvement retailer, with sales of $83 billion for the fiscal year ended February 1, The company, which is based in Atlanta, sells appliances, tools, paint, lumber, plumbing and electrical, garden and other home-improvement supplies in warehouse-sized stores that average 105,000 square feet. About 31% of sales came from plumbing, electrical and kitchen; 29% from hardware and seasonal; 21% from building materials and 19% from paint and flooring. The company's total selling space is about 236 million square feet. At the end of FY15, Home Depot had 2,269 stores. Approximately 28% of U.S. stores are in California, Florida and Texas. About 8% of the stores are in Canada and 4% are in Mexico. Online sales represented about 4% of the total. VALUATION VALUATION Home Depot shares have returned approximately 50% in the last year. The shares are trading at 23-times our FY16 estimate and at 20-times our FY17 estimate. The S&P 500 is trading at about 17-times our earnings estimate for the current year. We think that the premium to the S&P 500 multiple reflects investors' perception of HD as a high-quality business, with a leading market position and additional upside as the housing market improves. We believe that management is making the right moves to improve logistics, merchandising and customer service. HD has exceeded its operating goals and has some insulation from internet competition. The shares are trading at 24-times trailing earnings. At a multiple of 25-times our EPS estimate for the next four quarters, which is unchanged from our previous note, the shares would be worth $142. At 24-times, the shares would be worth $137. HD shares appear to be attractively valued compared to a group of home products stores tracked by Bloomberg. HD's earnings multiple of 23-times the current-year consensus is just above the peer median of 20-times for 10 home products stores tracked by Bloomberg. We believe that HD's multiple is compelling based on the company's above-average EBIT margin (400 basis points above the peer average) and return on capital (almost double the peer average). The consensus long-term growth rate of 14% is also in line with the peer median. We rarely discuss dividend yields in our valuation section because they aren't often significant for retailers. However, at about 2%, HD's dividend yield is worth considering. It has grown at a compound annual rate of 24% over the last three years and we expect another double-digit increase next year. The shares are trading at an enterprise value of 15.8-times trailing EBIT. At a multiple of 16-times our estimate for the next four quarters, which is unchanged from our previous note, the shares would be worth $140. The company's peers trade at a median of 15.5-times EBIT. We believe HD is worth a small premium based on its execution, financial strength, and growth prospects, and that the shares remain attractive at current levels. We are raising our target price to $136. On August 18, BUY-rated HD closed at $122.80, up $3.10.

6 METHODOLOGY & DISCLAIMERS Report created Aug 19, 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.