NASDAQ: Report created Nov 20, 2017 Page 1 OF 6 Applied Materials produces semiconductor fabrication equipment, including products used in deposition, etching, ion implantation, metrology, wafer inspection and mask-making. Acquisitions expanded 's presence in flat-panel display fabrication equipment and in the solar semiconductor market. The $4.9 billion Varian acquisition enabled to build share in high-performance and low-power applications processors. The company's plans to combine with Tokyo Electron have now been cancelled. generated FY16 revenue of $10.83 billion. Analyst's Notes Analysis by Jim Kelleher, CFA, November 17, 2017 ARGUS RATING: BUY Continuing to exceed expectations; reiterating BUY Applied Materials grew fiscal 4Q17 revenue and non-gaap EPS by 20% and 41%, respectively, amid demand strength across semiconductor systems, display and services. Much as PCs and smartphones drove earlier stages of demand for semiconductors, the company believes important new inflections such as IoT, AR/VR, Big Data and AI will drive demand for semiconductor manufacturing solutions for years to come. Management guided for well-above-consensus performance in fiscal 1Q18 and expects positive demand and competitive trends to carry across 2018 into 2019. We are raising our sales and earnings outlook for FY18 while modeling continued growth in our initial projections for FY19. INVESTMENT THESIS BUY-rated Applied Materials Inc. (NGS: ) rose slightly in a down market after delivering another exceptional quarter to wrap up a highly successful October 2017 fiscal year. Fiscal 4Q17 revenue of $3.97 billion increased by 20% annually, while non-gaap EPS of $0.93 increased 41%. Both the semiconductor capital equipment and display capital equipment businesses logged sharp annual growth. Wafer fabrication equipment sales (WFE) were particularly strong for NAND producers, while the OLED transition is driving the display business. We expect positive demand trends to persist well into 2018 and beyond, based on technology transitions and on symbiotic growth in sensing data and data management. Much as PCs and smartphones drove earlier stages of demand for semiconductors, the company believes important new inflections such as IoT, AR/VR, Big Data and AI will drive demand for semiconductor manufacturing solutions for years to come. Applied Materials cited a virtuous-circle effect that appears to be driving exponential demand growth. The business and consumer worlds are increasingly being outfitted with Market Data Pricing reflects previous trading week's closing price. 200-Day Moving Average Price ($) Rating EPS ($) 50 25 Target Price: $65.00 52 Week High: $60.89 52 Week Low: $54.15 Closed at $56.36 on 11/10 0.26 Quarterly 0.34 0.50 0.66 0.67 0.79 0.86 0.93 0.98 1.00 1.01 1.05 1.03 1.05 1.06 1.10 Annual 1.76 3.25 4.03 ( Estimate) 4.23 ( Estimate) Revenue ($ in Bil.) Quarterly 2.3 2.5 2.8 3.3 3.3 3.5 3.7 4.0 4.1 4.2 4.2 4.3 4.2 4.2 4.3 4.4 Annual 10.8 14.5 16.8 ( Estimate) 17.1 ( Estimate) FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Oct 31 2016 2017 2018 2019 BUY HOLD SELL Argus Recommendations Twelve Month Rating SELL HOLD BUY Five Year Rating SELL HOLD BUY Sector Rating Weight Under Market 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: 50% 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 Market Overview Price $56.49 Target Price $65.00 52 Week Price Range $29.85 to $60.89 Shares Outstanding 1.07 Billion Dividend $0.40 Sector Overview Sector Technology Sector Rating OVER WEIGHT Total % of S&P 500 Market Cap. 24.00% Financial Strength Financial Strength Rating MEDIUM-HIGH Debt/Capital Ratio 36.2% Return on Equity 37.4% Net Margin 23.6% Payout Ratio 0.10 Current Ratio 3.14 Revenue $14.54 Billion After-Tax Income $3.43 Billion Valuation Current FY P/E 14.02 Prior FY P/E 17.38 Price/Sales 4.14 Price/Book 6.44 Book Value/Share $8.77 Market Capitalization $60.25 Billion Forecasted Growth 1 Year EPS Growth Forecast 24.00% 5 Year EPS Growth Forecast 11.00% 1 Year Dividend Growth Forecast 0% Risk Beta 1.50 Institutional Ownership 79.48%
NASDAQ: Report created Nov 20, 2017 Page 2 OF 6 sensors and smart devices which require rising semiconductor content. In turn, information generated by these devices requires storage, processing and data management, driving additional demand for semiconductors. Customers count on 's advanced solutions and expertise in materials innovation to facilitate current and new transitions. The company's increasingly efficient operations and growing volume leverage are leading to expanded margins and accelerating profit growth. We are raising our sales and earnings outlook for FY18 while modeling continued good growth in our initial projections for FY19. Despite a strong year-to-date run, shares remain attractive based on accelerating top-line and margin expansion prospects. We are reiterating our BUY rating on to a 12-month target price of $65. RECENT DEVELOPMENTS is up 77% year-to-date versus a 71% gain for a small subset of semiconductor capital equipment companies, a 36% gain for all Argus-covered semiconductor stocks, a 45% gain for the SOX semiconductor index, and a 15% rise for the S&P 500. The shares advanced 30% in 2016, compared to a 70% gain for Argus-covered semiconductor stocks. declined 25% in 2015, while semiconductor stocks in Argus coverage rose 9% for the year. shares rose 41% in 2014, compared to an average 18% gain for the peer group. In 2013, advanced 55%, while the Argus Semiconductor peer group rose 22%. For fiscal 4Q17 (ended October 29), Applied Materials reported revenue of $3.97 billion, which was up 20% year-over-year and 6% sequentially; toward the high end of management's guidance range of $3.85-$4.0 billion; and above the consensus call of $3.94 billion. Non-GAAP earnings of $0.93 per diluted share were up 41% year-over-year and $0.07 on a sequential basis; near the high end of management's guidance range of $0.86-$0.94; and two cents above consensus expectations. In its 50th year since inception, in fiscal 2017 delivered record performances across the board. FY17 revenue of $14.54 billion was up 34% from FY16; non-gaap operating profit of $3.9 billion was up 77%; and record non-gaap EPS of $3.25 per diluted share increased by 85% from FY16. For 4Q17, Semiconductor Systems revenue of $2.43 billion (61% of total) was up 14% annually though down 4% sequentially from the company's record 3Q17 performance. Operating profit grew 20% annually, and the operating margin of 32.9% expanded from 31.4% a year earlier. Semiconductor Systems operating profit and margin contracted sequentially. Within Semiconductor Systems, Foundry revenue (36% of SS total sales) was down 21% annually. DRAM (12% of SS total sales) revenue was up 37% annually amid industry memory shortages. Logic (8% of SS total) edged up 3% from the prior year. NAND Flash (38% of SS total sales) grew by 89% year-over-year. Global Services revenue (21% of total revenue) advanced 20% Growth & Valuation Analysis GROWTH ANALYSIS ($ in Millions, except per share data) 2012 2013 2014 2015 2016 Revenue 8,719 7,509 9,072 9,659 10,825 COGS 5,406 4,518 5,229 5,707 6,314 Gross Profit 3,313 2,991 3,843 3,952 4,511 SG&A 1,076 902 890 883 819 R&D 1,237 1,320 1,428 1,451 1,540 Operating Income 411 432 1,520 1,693 2,152 Interest Expense 78 76 72 103 139 Pretax Income 316 350 1,448 1,598 2,013 Income Taxes 207 94 376 221 292 Tax Rate (%) 66 27 26 14 15 Net Income 109 256 1,072 1,377 1,721 Diluted Shares Outstanding 1,277 1,219 1,231 1,226 1,116 EPS 0.09 0.21 0.87 1.12 1.54 Dividend 0.34 0.38 0.40 0.40 0.40 GROWTH RATES (%) Revenue -17.1-13.9 20.8 6.5 12.1 Operating Income -82.9 5.1 251.9 11.4 27.1 Net Income -94.3 134.9 318.8 28.5 25.0 EPS -93.8 133.3 314.3 28.7 37.5 Dividend 13.3 11.8 5.3 Sustainable Growth Rate -3.8-2.9 7.7 11.4 17.2 VALUATION ANALYSIS Price: High $13.94 $18.18 $25.71 $25.64 $33.68 Price: Low $9.95 $11.39 $16.40 $14.25 $15.44 Price/Sales: High-Low 2.0-1.5 3.0-1.8 3.5-2.2 3.3-1.8 3.5-1.6 P/E: High-Low 154.9-110.6 86.6-54.2 29.6-18.9 22.9-12.7 21.9-10.0 Price/Cash Flow: High-Low 9.6-6.9 35.6-22.3 17.6-11.2 27.0-15.0 15.2-7.0 Financial & Risk Analysis FINANCIAL STRENGTH 2014 2015 2016 Cash ($ in Millions) 3,002 4,797 3,406 Working Capital ($ in Millions) 4,144 5,463 4,721 Current Ratio 2.47 2.44 2.30 LT Debt/Equity Ratio (%) 24.7 43.9 43.6 Total Debt/Equity Ratio (%) 24.7 59.7 46.3 RATIOS (%) Gross Profit Margin 42.4 40.9 41.7 Operating Margin 16.8 17.5 19.9 Net Margin 11.8 14.3 15.9 Return On Assets 8.5 9.7 11.5 Return On Equity 14.3 17.8 23.2 RISK ANALYSIS Cash Cycle (days) 128.7 132.5 137.5 Cash Flow/Cap Ex Oper. Income/Int. Exp. (ratio) 16.2 16.5 14.0 Payout Ratio 181.0 45.9 35.6 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.
NASDAQ: Report created Nov 20, 2017 Page 3 OF 6 year-over-year; segment profit grew 20%, and the operating margin of 27.9% edged higher by 10 bps year-over-year. Display revenue (17% of total) advanced 50% year-over-year; segment profit grew 109% and the operating margin of 31.8% increased by 900 basis points from 4Q16. Regionally, experienced solid annual sales growth in almost every major market, with only Taiwan backing off. Sales in all other major markets grew in the high double digits, led by Korea and Southeast Asia. In a show of demand balance, total Asian revenue (84% of company total) rose 21%; non-asian revenue (16% of total) increased 20%. The entire semiconductor capital equipment industry is enjoying surging demand. Management believes is positioned to out-grow its peer group based on 'breadth that sets us apart.' CEO Gary Dickerson expressed confidence that can deliver double-digit growth across semiconductor, display and services again in fiscal 2018. Regarding the market outlook, the CEO expanded on and refined points made during the company's recent investor day (discussed in our note of 10/13/17). End markets are strong and getting stronger, reflecting a much broader set of demand drivers than in the past. Data growth is exploding, reflecting the proliferation of mobile devices; rapid growth in connected sensors & processors in the industrial and consumer worlds; and a range of transformative technologies, including big data analytics, cloud, deep learning, IoT, AI and robotics, among others. The CEO cited a virtuous-circle effect that appears to be driving exponential demand growth. The business and consumer worlds are increasingly being outfitted with sensors and smart devices which require rising semiconductor content. In turn, information generated by these devices requires storage, processing and data management, driving additional demand for semiconductors. In traditional markets, this wealth of new data from non-traditional sources is supporting growth in units and capacities in traditional equipment such as PCs, servers, networks, storage arrays and mobile devices. In their 'annual war for leadership in the smartphone market,' smartphone makers are adding more functionality and electronic content to devices. Major inflections are taking place in the data center, with new technologies (GPU, ARM) battling x86 CPU processing for leadership in HPC (high performance computing) and AI. The CEO reiterated the now common view that 'IoT, big data, and AI have the potential to transform entire industries.' The need to create AI-capable infrastructure and devices is driving major innovation and demand growth in sensors, memory, storage, and computing. The trend shift toward highly specialized architectures customized for AI workloads requires new chip form factors, including much bigger chips, stated the CEO. For applications where latency and security are important, such as autonomous driving, data will be processed and stored at the network edge for immediate availability. This means more memory and logic content in edge and mobile devices, where power Peer & Industry Analysis The graphics in this section are designed to allow investors to compare 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 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 might fit into or modify a diversified portfolio. P/E 60 40 20 Value XLNX TXN ADI MCHP SWKS LRCX 5-yr Growth Rate(%) AMD 10 12 14 16 Growth 5-yr Net 1-yr EPS Market Cap Growth Current Margin Growth Argus Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating TXN Texas Instruments Inc 96,329 10.0 22.5 30.0 6.4 BUY Applied Materials Inc 60,246 11.0 14.0 23.6 5.0 BUY LRCX Lam Research Corp 34,085 12.0 14.8 22.9 11.6 BUY ADI Analog Devices Inc. 33,245 12.0 19.5 14.8 5.4 BUY MCHP Microchip Technology Inc 21,356 10.0 16.9 16.2 5.4 BUY SWKS Skyworks Solutions Inc 20,151 10.0 14.9 27.7 4.7 BUY XLNX Xilinx Inc 18,021 10.0 27.8 25.9 9.7 BUY AMD Advanced Micro Devices Inc. 10,979 15.0 71.1-1.4 68.8 HOLD Peer Average 36,801 11.3 25.2 20.0 14.6 P/E Price/Sales Price/Book PEG 5 Year Growth Debt/Capital
NASDAQ: Report created Nov 20, 2017 Page 4 OF 6 thriftiness is much more critical than in a plug-in cloud data center. believes the 'AI architecture war is shaping up to be the biggest battle of our lifetimes.' For specifically, the AI transition is expected to be a major driver for logic and foundry products. In terms of the intermediate-term market outlook, memory shipments are at record levels and market dynamics remain very healthy. Average NAND content in entry level phones has doubled in less than two years. In the data center, NAND-based SSDs are on the brink of achieving cost cross-over with 10 TB HDDs during 2018; thinks SSDs can claim around one-third of the enterprise storage market. For 2017, semiconductor systems revenue grew 38%. Within semiconductor systems, most niches grow in double digits in FY17, including 40% in process equipment and 20% in inspection and metrology. Demand for CMP, PVD and thermal products was particularly strong, driven by adoption of advanced interconnects in logic and increasing use of logic-like processes in memory. Bit demand growth remains strong, in the range of 20%-25% for DRAM and 40% for NAND. The memory roadmap is enabled by materials innovation, believes, which is highly positive given the company's leadership in materials. Foundry demand is strong driven by next generation mobility, automotive, and HPC. Management expects the emerging battle for AI and HPC leadership to drive investment in 7 nm and 5 nm process nodes in the logic market. China is also a major driver in this space, with Chinese spending on WFE expected to be $2 billion higher in 2018 than in calendar 2017. The company's outlook for WFE spending has strengthened just since 's investor meeting in September. Management now looks for global WFE spending in 2017 and 2018 to be 'several billion dollars higher' than the $90 billion forecast issued for both years in September. Additionally, 2018 WFE spending is forecast to grow from 2017 levels. In display, which grew 57% in FY17, lead times are long, giving the company increased visibility into customer orders. Management expects 2018 and 2019 to be strong for display amid transition to OLED devices. The services business is building a base of contract revenue to maintain the growing base of WFE and display fabrication machines in the field. 's backlog exiting 2017 was $6.03 billion, and book-to-bill was 1.11 at year-end. Backlog in semiconductor systems (50% of backlog) grew 43%, while services and display backlog grew in the 20%-30% range. On a line of business basis, expects semiconductor systems revenue to increase more than 30% year-over-year. Service revenue is forecast RECENT DEVELOPMENTS to increase in upper-teen percentages for 1Q18, while display revenue is forecast to increase in mid-single-digits. Total revenue is forecast to be up in the mid-20% range, while non-gaap EPS is forecast up more than 40%. We are raising our sales and earnings outlook for FY18 while modeling continued good growth in our initial projections for FY19. Despite a strong year-to-date run, shares remain attractive based on accelerating top-line and margin expansion prospects. EARNINGS & GROWTH ANALYSIS For fiscal 4Q17 (ended October 29), Applied Materials reported revenue of $3.97 billion, which was up 20% year-over-year and 6% sequentially; toward the high end of management's guidance range of $3.85-$4.0 billion; and above the consensus call of $3.94 billion. The non-gaap gross margin narrowed sequentially to 46.2% in 4Q17 from 46.6% in 3Q17 while expanding from 43.7% a year earlier. Reflecting mix and volume leverage along with cost discipline, the non-gaap operating margin edged higher to 28.7% in 4Q17 from 28.6% in 3Q17 and expanded from 25.2% in 4Q16. Non-GAAP earnings of $0.93 per diluted share were up 41% year-over-year and $0.07 on a sequential basis; near the high end of management's guidance range of $0.86-$0.94; and two cents above consensus expectations. For all of fiscal 2017, revenue of $14.54 billion rose 34% from $10.83 billion in fiscal 2016. Fiscal 2017 non-gaap earnings totaled $3.25 per diluted share, up 85% from $1.76 per diluted share in fiscal 2016. For 1Q18, forecast revenue of $4.0-$4.2 billion, which at midpoint would be up 25% annually; guidance was also well ahead of the $3.94 billion pre-reporting consensus forecast. Non-GAAP EPS is forecast at $0.94-$1.02, which at the $0.98 midpoint would be up 46%; the Street had been modeling $0.90. We raising our FY18 forecast to $4.03 per diluted share from $3.71. We are implementing a preliminary FY19 non-gaap EPS forecast of $4.23 per diluted share. Our GAAP forecasts are $3.88 for FY18 and $4.08 for FY19. Our five-year average annual earnings growth rate estimate remains 11%. FINANCIAL STRENGTH & DIVIDEND Our financial strength rating on Applied Materials is Medium-High. issued $2.2 billion in debt in March 2017 to 'increase onshore liquidity.' Since the end of 2Q17, has used some proceeds to retire debt. Cash & short- and long-term investments were $8.42 billion at the end of fiscal 2017. Cash & investments were $4.7 billion at the end of FY16, $6.1 billion at the end of FY15, and $4.1 billion at the end of FY14. Total debt was $5.30 billion at the end of fiscal 2017. Total debt was $3.34 billion at the end of FY16, $4.54 billion at the end of FY15, and $1.95 billion at the end of FY14. Net cash was $3.11 billion at the end of fiscal 2017, compared to $1.34 billion at the end of FY16 and $1.37 billion at the end of FY15. Reflecting recent operational strength, cash flow for FY17 was $3.61 billion. Cash flow from operations was $2.47 billion in FY16, $1.12 billion in FY15, and $1.80 billion in FY14. In April 2015, Applied Materials announced a three-year, $3 billion share repurchase authorization, beginning in 3Q15. In 1H17, it spent $412 million to repurchase shares. spent $1.89 billion to repurchase shares in FY16 and $1.3 billion in FY15. We expect a steady pace of buybacks going forward. The current annualized dividend of $0.40 yields about 0.7%. Although major acquisition plans have been scrapped, we are not looking for a dividend hike. Our dividend estimates are $0.40 per share for both FY18 and FY19. MANAGEMENT & RISKS Gary Dickerson became CEO in September 2013. Former CEO
NASDAQ: Report created Nov 20, 2017 Page 5 OF 6 Mike Splinter is executive chairman. In August 2017, new CFO Dan Durn replaced Bob Halliday, who had been CFO since 2013. Steve Ghanayem is head of the Leadership Semi division, Praba Raja is head of High Growth Semi, and Ali Salehpour is in charge of Display. The fallout from the failed combination with Tokyo Electron entails risks, such as loss of customers' future business that was predicated on combination synergies. On the other hand, no longer has risks associated with integration issues. An additional risk for Applied Materials is that strong multiyear growth in foundry orders could be coming to an end. We see limited risk on that front. More and more companies are adopting a fully fabless or 'fab-light' strategy in which they use foundries to build their products. The explosive growth not only in mobile devices but in mobile broadband ensures that demand for high-performance semiconductors will continue to strengthen on both a cyclical and structural basis. strained its balance sheet to pay for Varian. Cash was reduced from nearly $7 billion to $2.5 billion, and the company took on approximately $2 billion in debt. Fortunately, it appears that recent softness in semiconductor capital spending is ending. We will continue to monitor this situation, which remains fluid. We believe that Applied Materials, strengthened by Varian, is well positioned to gain market share. In our view, global demand for digital solutions is strong and will remain so going forward, keeping 's book of business healthy. Offsetting strength in semiconductor capital equipment are cyclical declines in the display and solar PV businesses due to overcapacity. Despite near-term challenges, we believe that the display business provides with additional avenues for growth over the long term. The fate of the solar PV business hangs in the balance, in our view. COMPANY DESCRIPTION Applied Materials produces semiconductor fabrication equipment, including products used in deposition, etching, ion implantation, metrology, wafer inspection and mask-making. Acquisitions expanded 's presence in flat-panel display fabrication equipment and in the solar semiconductor market. The $4.9 billion Varian acquisition enabled to build share in high-performance and low-power applications processors. The company's plans to combine with Tokyo Electron have now been cancelled. generated FY16 revenue of $10.83 billion. VALUATION trades at 14.1-times our FY18 non-gaap EPS estimate and at 13.5-times our FY19 non-gaap forecast; the two-year average forward P/E of 13.8 is well below the five-year (2013-2017) average of 17.3. The shares trade at an average 22% discount to the market multiple, well below the five-year historical premium of 7%. Other comparable multiples signal undervaluation by historical standards, and our price-based historical comparable valuation points to a value in the low-$60s, in a clearly rising trend. trades at a discount to peers on forward P/E, P/S and price/book ratio, and at a substantial discount to peers on PEG. Our discounted free cash flow analysis suggests a value in the $110s, also in a rising trend and well above current prices. Our blended valuation estimate is now $96 up from the $60s in less than a year. Including the current dividend yield of about 0.7%, appreciation to our $65 target implies a risk-adjusted total return that is higher than our forecast return for the broad market and consistent with a BUY rating. On November 17, BUY-rated closed at $56.49, down $1.35.
NASDAQ: METHODOLOGY & DISCLAIMERS Report created Nov 20, 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 Market 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 1934. 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.