the day ahead - april 23rd 2013

7/28/2019 The Day Ahead - April 23rd 2013

1/9

THE DAY AHEADREUTERS NEWS North American Edition For Tuesday, April 23, 2013

Stocks edged higher on Monday, supported by technologyshares and encouraging results. Treasury prices edged up.

The dollar fell against the yen, but remained near the key100 level. Oil and gold rose.

MARKET RECAP COMING UP

Apple reports quarterly results at a time when the market believesthe company appears to be losing a once vice-like grip on its sup-ply chain and on Wall Street. Suppliers and inves-tors are struggling to gauge demand for the iconiciPhone as Samsung and up-and-coming rivalsgrab market share. Listen for any indication ofwhat Apple plans to do with its $117 billion cashpile, which investors want more of. Separately, AT&T posts earn-ings for the quarter and the focus will be on its wireless marginsand subscriber figures.

Lockheed Martin, the largest U.S. defense contractor, is expectedto report a drop in revenues and a slight decline in earnings when itannounces first-quarter results. Lockheed will be the first majorweapons maker to announce results after across-the-board budgetcuts took effect on March 1.

Delta Air Lines is likely to report a profit for the first quarter, whichwould represent its first March quarter in the black since 2000,aided by corporate market share gains and better European per-formance. Also look for results from US Airways, which is expectedto also report a first-quarter profit against a year-ago loss. Bothairlines have noted that sequestration stalled some demand inMarch.

Amgen , the world's largest biotechnology company, is expected toreport higher profit and revenue for the first quarter and possibly aturnaround in sales of its anemia drug Aranesp after a rival medi-cine was pulled from the market over safety concerns.

DuPont posts quarterly results, its first since settling a multibillion-dollar lawsuit with rival Monsanto that eased shareholder concernsabout the company's agricultural unit.

Diversified U.S. manufacturer United Technologies is expected topost a jump in quarterly profit, helped by sales of elevators, air con-ditioners and jet engines.

Chesapeake Energy and its bond trustee Bank of New York Mel-lon are set to square off in a trial over the energy company's effortto redeem $1.3 billion in notes early. Chesapeake believed it haduntil March 15 to notify noteholders of its intention to redeem thenotes, but investors who own roughly $250 million of the notes ar-

gue the company had to redeem the notes by March 15. The com-pany owes them an additional $400 million make-whole paymentfor any redemption that occurs after March 15, they argue.

STOCKS Close Change % Chng Yr-high Yr-low

DJ IA 14567.25 19.74 0.14 14887.50 12035.10

Nasdaq 3233.55 27.50 0.86 3306.95 2726.68

S&P 500 1562.47 7.22 0.46 1597.35 1266.74

Toronto 12090.68 25.13 0.21 12904.71 11209.55

Russell 914.76 2.26 0.25 954.00 729.75

FTSE 6280.62 -5.97 -0.09 6533.99 5897.81

Eurofirst 1155.00 1.81 0.16 1209.05 1132.73Nikkei 13568.37 251.89 1.89 13568.25 10398.61

Hang Seng 22044.37 30.80 0.14 23944.74 21423.25

TREASURIES Yield

10-year 1.6963 3 /32

2-year 0.2298 0 /32

5-year 0.6919 2 /32

30-year 2.8778 4 /32

Price FOREX Last % Chng

Euro/Dollar 1.3059 -0.16

Dollar/Yen 99.28 -0.49

Sterling/Dollar 1.5282 0.33

Dollar/CAD 1.0261 0.06

COMMODITIES Price $ change % change

May crude $ 88.81 0.75 0.85

Spot gold (NY/oz) $ 1424.54 20.69 1.47

Copper U.S. (front month/lb) $ 3.1320 -0.0195 -0.62

Reuters/Jefferies CRB Index 283.30 -0.39 -0.14

BIG MOVERS Price $ change % change

Lululemon Athletica 73.89 5.51 8.06

Cell Therapeutics 1.16 0.08 7.41

Zoom Technologies 0.38 -0.02 -6.10

Federal-Mogul 4.84 -0.26 -5.10

KEY ECONOMICS EVENTS ET/GMT REUTERS POLL PRIOR SOURCE

ICSC/GS Report ww for w/e 04/20 0745/1145 -- -1.1 pct International Council of Shopping Centers/Goldman Sachs

Redbook mm for w/e 04/20 0855/1255 -- -2.7 pct Redbook Research

Markit manufacturing PMI for Apr-Flash 0858/1258 54.0 54.6

FHFA home price mm for Feb 0900/1300 -- 0.6 pct

New Home Sales for Mar 1000/1400 0.420 mln 0.411 mln Census Bureau (Dept. of Commerce)

Rich Fed manufacturing for Apr 1000/1400 -- 3 Federal Reserve Bank of Richmond

Richmond manufacturing shipments 1000/1400 -- 8

Richmond Services revenue 1000/1400 -- 4

For The Day Ahead - Canada, click here


2/9

2

COMING UP (continued)

THE DAY AHEAD For April 23, 2013

Travelers is the first major insurer to report first-quarter re-sults, and the market will watch to see if the company contin-ued its trend of increasing premium rates across its busi-nesses. The insurer, which is a Dow J ones industrial averagecomponent, will also look to address questions on its ability toretain customers.

Norfolk Southern, the third-largest U.S. public railroad com-pany, is expected to post strong quarterly results as steadyingcoal prices and a rise in surface transport helped, as morepeople and companies chose rails over air freight.

Look for a quarterly report from Illinois Tool Works, the diver-sified manufacturer that lost its longtime CEO to cancer latelast year. ITW has warned investors it expects sales to growmodestly in 2013, by just 1 to 3 percent. But it has promised togrow earnings by double digits by restructuring its notoriouslysprawling business and reducing the number of independentunits to around 150 from nearly 800.

Steelmaker AK Steel is expected to report its third straight

quarterly loss as demand for its products continued to remainweak. While the company expects a smaller sequential loss onhigher prices, analysts indicated that recovery in pricing is notpossible.

Coach reports quarterly results for the first time since theoverhaul of its stores and a bigger push into apparel andshoes began, with Wall Street keen to see if shoppers aretaking to it, which would allow Coach to narrow the gap withMichael Kors. The leather goods maker has struggled withsame-store sales in North America, still its biggest market, and

an improvement on that front is likely to give shares a lift.

CIT Group, the small business lender led by former MerrillLynch Chief Executive J ohn Thain, is expected to report solidprofit as it continues to cut its high-cost debt after emergingfrom bankruptcy protection three years ago.

Canada's biggest natural gas producer Encana reports quar-terly earnings. The company may update investors on itssearch for a new chief executive following the sudden depar-ture of Randy Eresman earlier this year.

Also expect quarterly results from Xerox, Forest Laborato-ries, Gannett, Yum Brands, United Technologies and VMWare.

Wells Fargo will hold its annual shareholder meeting. Lastyear's gathering was disrupted by demonstrators angered overforeclosure practices and other issues.

MARKET MONITOR

Click on the chart for full-size imageStocks climbed on Monday, led by gains in the Nasdaq afterreports that activist investor ValueAct Capital took a $2 billionstake in Microsoft, while a jump in the shares of Caterpillarhelped buoy the Dow industrials. Microsoft gained 3.6 percent.Caterpillar'sstock gained 2.8 percent and Halliburton rose 5.5percent. "Ultimately, we think cyclical names will lead the market

higher, but in the short term, the (recent) decline could con-tinue," said Eric Green, senior portfolio manager at Penn CapitalManagement, who said that cyclical stocks were oversold. TheDow was up 0.13 percent, the S&P 500 Index was up 0.46 per-cent and the Nasdaq was up 0.86 percent.

Government debt prices edged up on news of weaker-than-expected home resales in March and the implications of waninginflation. "We already had a tremendous move in rates in the lastfew weeks," Newedge's Van Batenburg said. "We will probablygrind to new lows for the year but it will take some time," hesaid. The U.S. central bank bought $3.728 billion in Treasuriesthat mature in J anuary 2019 to March 2020. The benchmark 10-year Treasury notes were 3/32 higher, yielding 1.70 percent.

The 30-year bond rose 4/32 to yield 2.88 percent.

The dollar slipped against the yen but remained within a hair'sbreadth of the key 100 level after major industrialized nationsgave a stamp of approval to a massive J apanese easing pro-gram, which has eroded the currency. The dollar last traded at99.27 yen , down 0.50 percent on the day. "The lack of pushbackby the G20 effectively gives the BOJ room to ease further ifneeded and should keep the yen biased broadly lower," saidOmer Esiner, chief market analyst with Commonwealth ForeignExchange, Inc, in Washington, DC. The euro last traded at$1.3060, down 0.15 percent on the day.

The May U.S. crude contract, which expires Monday, was up0.85 percent to $88.81 a barrel. The crude for J une delivery wasup 1.19 percent to $89.32 a barrel. "The oil market is just tryingto settle out, and to see whether the corrective action we sawlate last week and this morning is going to continue," said AndyLebow, senior vice president for energy at Jefferies Bache inNew York. "The question is whether this downtrend we've beenin since the first of April is going to break or brake."

Gold rose closed up 1.5 percent, cutting gains late in the ses-sion but remaining supported by strong physical buying, after theprice hit a two-year low last week. The technical outlook for gold,which is down more than 15 percent this year, has yet to im-prove despite the physical buying in Asia and elsewhere. Spot

gold rose 1.53 percent to $1,425.26 per ounce. U.S. gold fu-tures for June delivery was $1,425.50, up 2.13 percent.
http://link.reuters.com/cyc24t


3/9

3

TOP NEWS

Click on the chart for full-size imageCaterpillar profit misses, cuts outlook on w eak miningCaterpillar posted disappointing quarterly results and cut its2013 profit forecast to reflect a drop in demand for heavy equip-ment from its mining customers. But Chairman and CEO DougOberhelman said the mining sector has hit bottom and produc-tion was expected to ramp up in the second quarter, based on

lower inventories in China and the United States. The companysaid it now expects to report a 2013 profit of $7 per share onsales of $57 billion to $61 billion. The company earned a profit of$880 million, or $1.31 a share, down from $1.59 billion, or $2.37a share, in the year-ago quarter. Sales during the period fell 17percent to $13.20 billion. Caterpillar also said that it would re-sume a share buyback for the first time in five years.

Existing home sales edge down, prices riseU.S. home resales edged downward in March, pointing to someslowdown in the housing market recovery pace as overall eco-nomic activity cools. The National Association of Realtors saidexisting home sales slipped 0.6 percent last month to a season-ally adjusted annual rate of 4.92 million units. Sales in Marchwere 10.3 percent higher than the same month last year, andthe median price for a home resale was up 11.8 percent, thebiggest increase since November 2005, to $184,300. The dataadded to other reports such as employment and factory activitysuggesting a loss of momentum in the economy as the firstquarter ended. The supply of existing homes on the market forsale rose 1.6 percent during the month to 1.93 million, whichrepresented 4.7 months' supply at March's sales pace, up from4.6 in February.

Halliburton in Gulf sp ill settlement talks, takes chargeHalliburton is in talks to settle private claims against it in a trialto determine how to allocate blame for the 2010 Gulf of Mexicospill, the oilfield services company said, as it took a $1 billionpretax charge for a possible deal. Halliburton CEO David Lesar

said the charge is based on where Halliburton is in the negotia-tions. It is on top of a first-quarter 2012 charge of $191 millionafter taxes, or $300 million before taxes. The company reporteda loss of $13 million, or 1 cent per share, compared with year-earlier earnings of $635 million, or 69 cents per share. Excludingthe charge and other items, it made a profit of 62 cents pershare, ahead of the 57 cents that analysts expected. Revenuerose 1.5 percent to $6.97 billion.

ECB policymakers hint at possible interest rate cutComments by European Central Bank policymakers stressingfalling inflation and poor growth prospects in the euro zone sug-gest the ECB may be leaning towards a further cut in its mainrefinancing rate. ECB Vice-President Vitor Constancio said

inflation had fallen "rather significantly" and a rate cut was"always a possibility", but Governing Council member KlaasKnot said the ECB had "little ammunition left" and should use itcarefully. The ECB left rates at a record low of 0.75 percent inApril, but ECB President Mario Draghi said after its monthlypolicy meeting that the bank would "monitor very closely" alldata and stand "ready to act" to boost the recession-hit eurozone. But the bank believes another cut would have only limitedimpact because its ultra-low interest rates do not reach alleconomies in the currency bloc evenly, with lenders in crisiscountries passing on higher funding costs to their consumers. Arate cut would have symbolic importance, however, signallingthat the ECB is ready to support the economy.

Dreamliner set to fly in a week as Boeing f ixes battery

Boeing began installing reinforced lithium-ion batteries on fivegrounded 787 jets in J apan, starting a process that should makethe first commercial Dreamliners ready to fly again in about aweek. Boeing's Dreamliners have been grounded since regula-tors in the United States and elsewhere ordered all 50 planesout of the skies in mid-J anuary after batteries on two of themoverheated. U.S. regulators approved a new battery design onFriday. The grounding has cost Boeing an estimated $600 mil-lion, halted deliveries and forced some airlines to lease alterna-tive aircraft. Several airlines have said they will seek compensa-tion from Boeing, potentially adding to the plane maker's losses.

ValueAct takes $2 billion Microso ft stakeActivist investor ValueAct Capital has taken a $2 billion stake in

Microsoft, CNBC reported, helping Microsoft shares climb to aseven-month high. CNBC's David Faber reported the stake. AtFriday's closing price, a $2 billion stake would represent about67.2 million Microsoft shares. That represents less than 1 per-cent of Microsoft but would be enough to make ValueAct a top-15 investor in the company, based on Thomson Reuters data.ValueAct describes its management as being experts in"sourcing investments in companies they believe to be funda-mentally undervalued, and then working with management andthe company's board to implement strategies that generate su-perior returns on invested capital."

Google defends UK tax payments, says good for countryGoogle executive chairman Eric Schmidt has defended his com-pany's low tax payments in Britain, saying the company followsthe letter of the law and makes a positive contribution to the Brit-ish economy. A British parliamentary committee last year ac-cused Google, Amazon.com Inc and Starbucks Corp of"immorally" minimising their tax bills. Schmidt rejected the criti-cism in a radio interview with Britain's BBC. "I think the mostimportant thing to say about our taxes is that we fully complywith the law and we'll obviously, should the law change, we'llcomply with that as well," he said. In a response to public angerover the issue, the British government is leading an internationalpush to reduce profit-shifting by international companies. Mean-while, a German privacy regulator has fined Google for illegallyrecording signals from Wifi networks while it was taking photo-graphs for its Street View service.

http://link.reuters.com/ser57t


4/9

4

TOP NEWS (continued)

News Corp, shareholders agree to phone hacking settle-mentNews Corp will receive $139 million worth of insurance pro-ceeds in a rare cash settlement that resolves a lawsuit by share-holders alleging the board failed to investigate the company'sphone hacking scandal. The $139 million, which will be paid by

the liability insurance for the board members, is the largest cashsettlement in such a derivative case, according to one of theplaintiff's attorneys. As part of the deal, News Corp said it wouldadopt enhanced corporate governance procedures, including apolicy to disclose to its shareholders political contributions madedirectly by the company. "We are pleased to have resolved thismatter," News Corp said in a statement.

Sprint forms committee, hires advisers to review Dish bidSprint Nextel said that its board had formed a special commit-tee of independent directors to review Dish Network's $25.5billion takeover bid for the No. 3 U.S. mobile provider. The com-mittee, which will be chaired by director Larry Glasscock, hiredBofA Merrill Lynch as its financial adviser and Shearman & Ster-ling LLP a its legal counsel. Other Sprint special committeemembers include J ames Hance, V. J anet Hill, William Nuti andRodney O' Neal.

ABB bets on solar power with $1 bln takeoverSwiss industrial groupABB is to buy U.S. solar energy companyPower-One for about $1 billion, betting that growth in emergingmarkets will revive a sector ravaged by overcapacity and weak-ening demand in recession-hit Europe. The world's biggest sup-plier of industrial motors and power grids said it had agreed to

pay $6.35 per share in cash for Power-One. The offer price is 57percent above Power-One's closing price on Friday, boosted by$266 million in net cash held by debt-free Power-One. Strippingout its cash pile, Power-One's enterprise value stands at $762million, valuing the bid at a more modest 6.4 times 2012 coreearnings.

PIC OF THE DAY

Zhang Bin, a Chinese People's Liberation Army soldier, carries a 60-

year-old survivor as he runs down a stretch of the road to Lingguantownship which was recently cleared of debris from landslides caused bySaturday's earthquake, in Baoxing county in Ya'an, Sichuan province,China.


Company Name Action

AppleBMO Capital cut target price to $440 from $460 on lowered mix assumptions and uncertainty around the J unequarter.

General Electric Nomura cut price target to $23 from $24 after the company posted lower-than-expected first-quarter results.

Honeywell Nomura raised target price to $85 from $77 on the company's strong execution given the low volume environment.

International BusinessMachines

SocGen cut target price to $203 from $211, citing the company's disappointing first-quarter results.

Union PacificMorgan Stanley raised price target to $157 from $155 after the company posted better-than-expected quarterly re-sults, expects positive growth for FY2013.

ANALYSTS RECOMMENDATIONS


5/9

5

THE DAY AHEAD - CANADA For April 23, 2013

COMING UP

MARKET MONITOR

Canadian retail data out on Tuesday is expected to show thepace of sales growth slowed to 0.3 percent in February from1.0 percent a month earlier. This would reinforce the market

view that the Canadian economy has hit a slow patch and in-terest rates are unlikely to increase for a long time.

Bank of Canada Governor Mark Carney and Senior DeputyGovernor Tiff Macklem testify before a House of Commonscommittee about a monetary policy report released last weekthat lowered domestic growth forecasts but still insisted thatrock-bottom interest rates will rise one day.

Canada's biggest natural gas producer Encana is expected toreport its first quarter results. Analysts forecast a profit of 3cents per share. The company may also update investors onits search for a new chief executive following the sudden de-parture of Randy Eresman earlier this year.

Canada's main stock index advanced on Monday, extending itsgains to a third straight session as strength in commodity priceslifted shares of gold and energy companies. The Toronto StockExchange's S&P/TSX composite index was up 0.19 percent at12,088.44. Goldcorp added 2.55 percent and Eldorado Goldwas up 5.40 percent.

The Canadian dollarwas up 0.04 percent at $1.0259.

BIG MOVERS Price C$

Aquila Resources 0.12 0.02

% Change

20.00

Centerra Gold 4.17 0.52 14.25

Lululemon Athletica 75.96 5.76 8.21

Air Canada 2.62 -0.38 -12.67

Romarco Minerals 0.46 -0.05 -9.00

Niko Resources 6.17 -0.16 -2.53

TOP NEWS

Air Canada sees w ider operating loss, shares tumbleAir Canada said it expects to post a wider first-quarter operatingloss, due to weather-related flight cancellations, operationalchallenges at its main airport hubs and an impairment charge,sending its shares tumbling. Announcing preliminary resultsahead of schedule, so it could share the information with lendersin talks on financing options, heavily indebted Air Canada said it

expects an operating loss of C$106 million in the quarter, widerthan the year-ago loss of C$91 million. Air Canada expects itsfirst-quarter net loss to narrow to about C$260 million fromC$274 million a year earlier. The carrier also forecast an ad-

justed loss of about C$143 million, down from a loss of C$162million in the first quarter of 2012.

Barrick puts Australian gold mines up for saleBarrick Gold, battling heavy debt and a slump in gold prices,has put three mines in Western Australia up for sale, a personfamiliar with the process said. The world's top gold producer hasappointed Bank of America's Merrill Lynch and UBS to advise onthe sale of its Yilgarn South group of mines -- Darlot, GrannySmith and Lawlers -- which last year produced 452,000 ouncesof gold. Total cash costs at the mines were $768 an ounce lastyear, according to Barrick's website.

EU-Canada trade talks stall ed, overshadowed by U.S.Talks to wrap up a multi-billion-dollar free trade deal betweenCanada and Europe have stalled, diplomats said, raising con-cerns the agreement could be put on hold as Brussels switchesits attention to a much bigger pact with the United States. Diplo-mats and officials told Reuters wrangling over the amount ofbeef Canada will be able to export to the EU, and EU demands

for greater ability to bid for Canadian government contracts, arebedevilling the final stages of the agreement. "This was sup-posed to be done in November, then we said February, but nowthere's no clarity ... No one wants to walk away from this, but itcould be put on ice if things remain stuck for a prolonged pe-riod," said an EU diplomat.

Teck Resources is due to report its first quarter results. Ana-lysts expect a profit of 44 Canadian cents per share, comparedto a profit of 86 Canadian cents a share in the year-ago quar-

ter. Investors will be looking for updates on the company'spromising copper development projects, including the environ-mental impact study for its Quebrada Blanca Phase 2 projectin Chile.

Celestica is due to report its first quarter results. Analysts ex-pect a profit of 15 cents per share, compared to a profit of 20cents a share, a year earlier. For the first time in over threeyears, Celestica's quarterly result will exclude revenue fromBlackberry, whose exit cost the company between $55 millionand $65 million in restructuring.

TransAlta is expected to report its first quarter results. Ana-lysts expect the company to earn 20 Canadian cents per share

on revenue of C$595.5 million.


6/9

6

ANALYSIS AND INSIGHT

Apple's dimming luster ro ils suppl iers, investorsBy Reiji Murai and Clare J im

Apple Inc marketing chief Phil Schiller let slip during last Au-gust's courtroom battle with Samsung that when setting fore-casts for new iPhones, the inside joke was that people shouldassume sales would equal all previous versions combined.

That quip, uttered in front of Samsung Electronics Co Ltd's triallawyers and the media, no longer rings true as Apple appears tobe losing a once vice-like grip on its supply chain and WallStreet.Suppliers and investors are struggling to gauge demand for theiconic smartphone as Samsung and up-and-coming rivals grabmarket share. Indications of reduced shipments now sendshares in Apple and its component-makers into a tailspin. Andcriticism that innovation has stalled after the death of its legen-dary co-founder Steve J obs 18 months ago is hurting sentimentin a stock that closed the week below $400 for the first timesince December 2011.Sources at several Asian suppliers, which for years basked inthe glow of Apple's success and enjoyed stock gains even onrumors they might be among the select group of companies tosell components to Apple, told Reuters last week about ever-moving deadlines and said they were trying to reduce their reli-ance on the company.An Apple supply chain source in J apan said those in the industryoften jokingly refer to the company as "Poison Apple" becauseof its hard-to-meet high standards and low price expectations."'Apple can do no wrong' can only work until Apple does wrong,"said Roger Kay, president of researcher and consultant End-point Technologies Associates. "It's like the rubber band effect.

The more you stretch it, the more snap you get coming back."Apple reports quarterly results on Tuesday and declined to com-ment for this story. It has consistently said it focuses on makingthe best products - its iPhones remain the industry gold standard- and avoids discussing product strategy.

CEO Tim Cook stressed on the last quarterly earnings confer-ence call that it is difficult to paint a complete picture of its pro-duction process from "a few data points."Supplier sources in J apan and Taiwan, home to dozens of Applesuppliers, said they initially expected mass-production of thenext iPhone to begin in June.

That date may have begun to slip beyond J une, the sourcessaid. The phone, widely referred to as the iPhone 5S, is ex-pected to include new features such as a fingerprint sensor. Asupply chain source in Taiwan said Apple was trying to find acoating material that did not interfere with the fingerprint sensor,and this may be causing a delay.In addition to the 5S, suppliers say Apple is also developing acheaper model, which can appeal to lower-income buyers in

growth markets such as China and India. A supplier source inJ apan told Reuters small-scale production of display panels willbegin in May, ramping up to mass production in J une.Both phones will use the same 4-inch screen, but the cheaperversion will probably not include the new fingerprint technologyand sport a cheaper plastic casing, the sources said.SPECULATE AT WILLWild rumors plague every new iPhone launch. But this yearmuch of the blogger and industry speculation has centered onwhether demand for the iPhone is waning as an increasing num-ber of consumers choose alternatives, including phones fromSamsung - now the world's biggest seller of cell phones - andthose produced by other adopters of Google Inc's Android soft-ware.Apple, the former darling of Main and Wall Street, rode a seven-fold increase in its stock price in the four years to September2012. So Apple fans watched with increasing consternation as

the shares fell 44 percent since then, shedding some $280 bil-lion in market value along the way.

That fall was mirrored in the smartphone arena. In 2012, Sam-sung became No.1 in the global market with a 30.3 percentshare, knocking off Apple - which had a 19.1 percent share -partly by flooding the market with cheaper devices. For the

fourth quarter, Apple's share of the global smartphone marketfell to 21.8 percent from 23 percent a year earlier, according toresearch firm IDC.

The erosion of Apple's industry and market supremacy over thepast year may embolden carrier partners and suppliers, analystssay. That could mean tougher negotiations over componentcosts and the subsidies carriers pay to stock iPhones.

To be sure, Apple had a record 2012 in sales and profit. ItsiPads lead the tablet market, and its Mac computers continue tooutperform in a shrinking PC market. Analysts also say slowinggrowth is inevitable for a company its size.But its recent stock-market descent has unnerved many inves-tors struggling to get a read on what Apple's numbers could looklike on Tuesday - just days away from when Samsung beginsselling a new Galaxy S4 smartphone with a sharper screen andplethora of software-enhanced features.Look no further than Cirrus Logic Inc. The chipmaker, with just$700 million in revenue, precipitated an 8 percent drop in Ap-ple's share price over Wednesday and Thursday when it warnedof reduced forecasts from one customer, widely assumed to beApple. The warning spooked investors because Cirrus Logicrelies on Apple for more than 90 percent of its sales.Shares in Apple suppliers across the globe, including chipmakerQualcomm, South Korea's LG Display Co Ltd and J apan'sToshiba Corp, declined as a result.On Tuesday, Apple is expected to report a mere 8 percent in-crease in revenue in its fiscal second quarter, among the weak-est showings in years, according to average analysts' estimates.And net earnings are expected to inch up just 2 percent as the

intensifying competition compresses its margins.Some say Apple's current market malaise is a re-balancing fromthe years when the stock was celebrated as a sure-fire bet.

The market became "irrational" about Apple with some analystsfloating a $1,000 target price a year ago, said one hedge fundmanager focused on the technology sector. Investors shouldhave taken note when Apple missed revenue expectations ineach of the past three quarters, said the manager, who declinedto be identified."The market is not being irrational with Apple today," he said."The market was being irrational with Apple last year, when theykept taking the stock price higher."

Ahead of reform, medical care slowdown hi ts U.S.

companiesBy Bill BerkrotAs the clock ticks down to the start of a U.S. healthcare over-haul, companies from device makers to hospital chains havebeen surprised to see Americans make even fewer trips to thedoctor's office.Use of non-emergency medical services has been weak for sev-eral years in the wake of a deep recession, high joblessness andthe steadily rising cost of care.

Those trends now may be exacerbated in the months beforePresident Barack Obama's healthcare law takes full effect in2014, analysts said. Part of the reason is that employers areshifting more of the insurance benefits they offer to so-calledhigh-deductible plans, requiring employees to pay more for theirmedical care upfront, to buffer new costs they face under"Obamacare". This is all starting to show in some weak and dis-appointing earnings reports for the first quarter. "It's still early in



7/9

7

ANALYSIS AND INSIGHT (continued)

the reporting season, but so far it all points to softness. In theU.S. volumes at hospitals, in-patient and out-patient are soft,"said David Heupel, senior healthcare analyst at Thrivent Invest-ment Management.In the past week, medical testing companies, such as QuestDiagnostics, medical device makers Johnson & Johnson and

Abbott Laboratories, hospital operators, such as HCA HoldingsInc, and even diaper maker Kimberly-Clark, which has a surgicalsupply unit, have cited a slowdown in use of medical services.Kimberly-Clark executives on Friday noted that other companieshave reported surgical admissions down about 4 percent in thefirst quarter. Earlier this week, J &J reported a 10.5 percent de-cline in its U.S. surgical sales, and Chief Financial Officer Domi-nic Caruso said a modest upswing in medical device use seen inthe fourth quarter did not persist into 2013.

J P Morgan analyst Michael Weinstein, in a research note, saidU.S. physician office visits were down 3.3 percent in March froma year ago, after a 3.6 percent decline in February. And HCA onMonday warned about a slowdown in the growth of hospital ad-missions and weakness in outpatient volumes in the quarter."We've been seeing very similar trends come out that suggestutilization, which had started to pick up steam in the second halfof 2012, seems to be sort of decelerating in the first quarter,"said Morningstar analyst Debbie Wang in reference to the medi-cal technology sector. Obama's healthcare law aims to extendinsurance coverage to over 30 million additional Americans.While that will mean new clients for insurance companies, thelaw also requires them to bear new costs including full coverageof preventive health services. The Obama administration alsohas introduced a new tax on medical devices and provides forgreater scrutiny of drug reimbursement, both of which may putpressures on pharmaceutical companies and device makers.

The first wave of earnings reports and cautionary messageshave already take a toll on some share prices.

The Dow Jones U.S. Medical Equipment Index finished down

2.7 percent for the week. St. J ude Medical shares were off 3

percent and Quest shares have fallen 4 percent since they re-ported first-quarter results on Wednesday.HCA shares have declined 0.7 percent since Monday's an-nouncement, about in line with the 0.6 percent decline in thebroader S&P 500 Healthcare Index.However, larger more diversified companies such as J NJ and

Abbott, with less exposure to medical care usage trends, bothsaw shares rise after reporting first-quarter earnings.WAITING UNTIL YEAR'S ENDIndustry analysts said it was too early to gauge the full effecthealthcare reform will have on corporate profits in 2013, andsome are skeptical that trends seen in the first quarter are re-lated to the new law."It's just a continuation of this low utilization environment thatwe've been in, driven by the weak economy and lack of jobgrowth - the same macro drivers that have been impacting theprovider world for a few years now," said Thomas Carroll, ananalyst with Stifel Nicolaus and Co who follows the healthcareinsurance industry.However, Carroll did acknowledge that employers may alreadybe shifting more healthcare costs to employees in anticipation ofchanges to benefit plans. UnitedHealth Group, the largest U.S.health insurer, on Thursday said it had seen an 18 percent risein the number of consumers enrolled in high-deductible healthplans in the first quarter. These consumers are likely to put offnon-urgent medical care until after they have paid their maxi-mum deductibles in the year. "People will consume healthcareservices after they've met their deductibles, and so the fourthquarter will be strongest," said Heupel.Morningstar's Wang agreed that the pattern of healthcare con-sumption, with weakness seen in the first six months of the yearfollowed by a stronger finish, was likely to continue."Because cost sharing is not something that we think is going todiminish any time soon, as more of those out-of-pocket costs areshifted on to people, I think you will see this type of seasonal

affect," she said.


ON THE RADAR

ECON INDICATOR ET/GMT REUTERS POLL PRIOR SOURCE

WED: Mortgage Index for w/e 04/19 0700/1100 -- 866.1 Mortgage Bankers Association

Refinancing Index 0700/1100 -- 4,685.1

Durable Goods for Mar 0830/1230 -2.8 pct 5.6 pct Census Bureau (Department of Commerce)

Ex-Transportation 0830/1230 0.5 pct -0.7 pct

Ex-Defense 0830/1230 -2.3 pct 4.4 pct

Non-Defense ex-air 0830/1230 0.4 pct -3.2 pct

Building Permits for Mar-Rev TIME:TBA -- 0.902 mln Census Bureau

THU: Initial Claims for w/e 04/20 0830/1230 351,000 352,000 Labor Department

4 Week Average 0830/1230 -- 361,250

Continuing Claims for w/e 04/13 0830/1230 3.060 3.068 mln

K.C. Fed Comp Index for Apr 1100/1500 -- -5

FRI: Real GDP qq SAAR for Q1-Adv 0830/1230 3.0 pct 0.4 pct Bureau of Economic Analysis (Department of Commerce)

Final sales 0830/1230 2.4 pct 1.9 pct

Implicit Deflator 0830/1230 1.4 pct 1.0 pct

Core PCE Price 0830/1230 1.2 pct 1.0 pct

PCE Price Index 0830/1230 1.1 pct 1.6 pct

Reuters/UMich for Apr-Fin 0955/1355 73.2 72.3Reuters/University of Michigan. Part of the Surveys of Consum-ers

Current Conditions 0955/1355 85.0 84.8Expectations 0955/1355 64.6 64.2

ECRI Weekly Index for w/e 04/19 1030/1430 -- 130.6 Economic Cycle Research Institute


8/9

8


KEY RESULTS vs. THOMSON REUTERS I/B/E/S ESTIMATES

Company Name Quarter EPS Estimates Year Ago Rev Estimates (mln)

Apple Q2 $10.03 $12.30 $42,310

Amgen Q1 $1.84 $1.61 $4,371

Air Products Q2 $1.37 $1.31 $2,589

C. R. Bard Q1 $1.42 $1.61 $728

Broadcom Q1 $0.56 $0.65 $1,914Coach Q3 $0.80 $0.77 $1,178

DuPont Q1 $1.52 $1.61 $10,410

Discover Financial Services Q1 $1.12 $1.18 $1,978

Edwards Lifesciences Q1 $0.76 $0.53 $519

Forest Laboratories Q4 $0.14 $0.72 $805

FMC Technologies Q1 $0.46 $0.41 $1,590

Gannett Q1 $0.35 $0.34 $1,242

Ingersoll Rand Q1 $0.40 $0.31 $3,166

Illinois Tool Works Q1 $0.96 $0.97 $4,273

J ohnson Controls Q2 $0.42 $0.53 $10,487

J uniper Networks Q1 $0.21 $0.16 $1,065

Lockheed Martin Q1 $2.04 $2.02 $10,314Molex Q3 $0.35 $0.37 $918

Nabors Industries Q1 $0.28 $0.65 $1,641

Newfield Exploration Q1 $0.45 $0.90 $650

Norfolk Southern Q1 $1.17 $1.23 $2,779

Owens-Illinois Q1 $0.57 $0.73 $1,707

PACCAR Inc Q1 $0.68 $0.91 $3,703

Pentair Q1 $0.56 $0.64 $1,800

Ryder System Q1 $0.78 $0.59 $1,574

Reynolds American Q1 $0.69 $0.63 $1,923

Regions Financial Q1 $0.20 $0.11 $1,328

Robert Half International Q1 $0.41 $0.34 $1,044

AT&T Q1 $0.64 $0.60 $31,746Torchmark Q1 $1.37 $1.27 $955

The Travelers Companies Q1 $2.02 $2.01 $5,615

Total System Services Q1 $0.34 $0.30 $478

United Technologies Q1 $1.29 $1.31 $14,936

Waters Q1 $1.09 $1.00 $432

Xerox Q1 $0.24 $0.23 $5,497

Yum! Brands Q1 $0.60 $0.76 $2,556

** Includes companies on S&P 500 index. Estimates may be updated or revised.


9/9

9

The Day Ahead - North American Edition is compiled by Karan Khemani, Benny Thomas and Chandrashekhar Modi in Bangalore; Franklin Paul and Meredith Mazzilli inNew York.

THE DAY AHEAD - North American Edition is produced by Reuters News

For questions or comments about this report, email us at: [email protected] call us at +91 80 4135 5929

Visit the Thomson Reuters Equities Community Site at: http://customers.reuters.com/community/equities/

For more information about our products: http://thomsonreuters.com/products_servicesOr send us a sales enquiry at: http://thomsonreuters.com/products_services/financial/contactus/or call us on North America: +1 800 758 5555

2013 Thomson Reuters. A ll rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. Any copying, distribution or redistribution of this

content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for anyactions taken in reliance thereon. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.


StarMine SmartEstimatespredict future earnings more accurately than consensus (or mean) estimates by putting more weight on the recent forecasts of StarMine's top-rated analysts. StarMine is a subsidiary of Thomson Reuters. The predicted surprise is the difference between the SmartEstimate and consensus. When a predicted surpriseis 2 percent or more, history shows that you can anticipate an earnings surprise in the same direction with an accuracy rate of 70 percent.

Company Smart Estimate Predicted Surprises Market Cap. Industry

Liberty Media $0.39 20.70% $13,097 Media

Weyerhaeuser $0.26 12.25% $16,272 Real Estate Investment Trusts (REITs)

Pultegroup $0.16 11.06% $6,971 Household Durables

KKR & Co $0.85 8.09% $13,204 Capital Markets

Kinder Morgan Management $0.67 7.71% $10,117 Oil, Gas & Consumable FuelsWynn Resorts $1.64 5.82% $12,872 Hotels Restaurants & Leisure

Melco Crown Entertainment $0.25 4.85% $12,363 Hotels Restaurants & Leisure

Carlyle Group $0.98 4.67% $9,870 Capital Markets

Manulife Financial $0.36 4.64% $25,419 Insurance

W.R. Berkley $0.77 4.01% $6,019 Insurance

XL Group $0.67 3.59% $8,973 Insurance

LinkedIn $0.31 3.38% $19,079 Internet Software & Services

Westlake Chemical $1.30 3.37% $5,533 Chemicals

Everest Re Group $4.53 3.22% $7,548 Insurance

Valero Energy $1.01 3.13% $21,744 Oil, Gas & Consumable Fuels

Moody's $0.87 2.59% $12,215 Diversified Financial Services

Marathon Petroleum $2.21 2.41% $26,055 Oil, Gas & Consumable Fuels

Gap $0.58 2.40% $17,216 Specialty Retail

Rogers Communications $0.77 2.38% $26,111 Wireless Telecommunication Services

Baidu $1.01 -2.07% $30,221 Internet Software & Services

Southern Copper $0.59 -2.32% $26,719 Metals & Mining

Newmont Mining $0.75 -7.83% $16,221 Metals & Mining

HCA Holdings $0.78 -8.80% $16,764 Health Care Providers & Services

Goldcorp $0.35 -12.33% $22,602 Metals & Mining

Forest Laboratories $0.12 -19.54% $9,562 Pharmaceuticals

PREDICTED RESULTS SURPRISES FROM STARMINE

the day ahead - april 23rd 2013

Documents