MORNING NEWS CALL U.S. Edition Tuesday, May 2, 2017

TOP NEWS COLUMN • Pfizer beats first-quarter profit estimates Pfizer Inc, the largest U.S. drugmaker, reported a bigger-than-expected quar- It doesn’t get any better than this terly profit, helped by higher sales of breast cancer drug Ibrance and pain re- (it gets worse) lief drug Lyrica. • Drugmaker Merck's profit beats estimates as margins rise For the global economy it doesn’t get Merck & Co Inc reported a better-than-expected quarterly profit, helped by any better than this, which is a differ- higher gross margins, and the drugmaker also narrowed and raised its reve- ent way of saying it gets worse. nue and profit forecasts for 2017. While the International Monetary • Health insurer Aetna's adjusted profit breezes past estimates Fund is calling for a gentle pickup in Aetna Inc reported better-than-expected adjusted earnings, helped primarily growth next year, up one tenth of a by strength in the U.S. health insurer's commercial and government unit even percentage point to 3.6 percent, con- as it continued to face pressure in its Obamacare business. sensus among private-sector econo- • Coach's quarterly profit jumps 8.6 pct on less discounting mists shows most leading econo- Coach Inc posted an 8.6 percent jump in quarterly profit, as the handbag mak- mies peaking early this year. er cut back on discounting its products in the United States. Forecasts show the U.S. peaking in • Drugstore chain CVS posts 17 pct drop in profit the second quarter and China, the Drugstore chain and pharmacy benefits manager CVS Health Corp reported a euro zone, Japan, Britain and South 17 percent drop in quarterly profit, as it filled fewer prescriptions at its pharma- Korea all having already topped out cies and lower traffic hurt sales at the front-end of its stores. in the first quarter. Only India, Brazil and Russia will accelerate into 2018. This will be a slowing of growth, not BEFORE THE BELL a downturn, but one which will come, U.S. stock index futures were little changed ahead of the Federal Open given the very parsimonious man- Market Committee’s two-day meeting on interest rate policy. Investors will agement of capacity by industry, look forward to the language of the Fed statement for guidance on the number along with some pickup in inflation of interest rates hikes this year and next. Apple and Gilead Lifesciences are and thus interest rates. among few major companies scheduled to report quarterly results later in the Not a disaster, but slowing growth day. European markets rose supported by strong corporate earnings and and rising inflation and interest rates manufacturing data. Asian shares closed mostly higher. The dollar hit a one- are not a classic recipe for a bull month high against the yen, lifted by a surge in U.S. government bond yields market in risk assets. after Treasury Secretary Steven Mnuchin commented on the possibility of “To see upside surprises to the con- ultra long-term bond issuance. Gold was little changed. Oil prices rose on ex- sensus growth outlook outlined pectations that major OPEC exporters would extend output cuts into the sec- above would to our minds require a ond half of the year. significant expansion of credit – this could come from households, non- financial corporations and/or govern- STOCKS TO WATCH ments,” Michala Marcussen, global head of economics at Societe Gen- Results erale, wrote in a note to clients. • Advanced Micro Devices Inc (AMD). The company reported an 18.3 per- “With growth most likely at the peak cent jump in quarterly revenue, largely in line with analysts' estimates, but the and central banks set to tighten, that chipmaker's second-quarter gross margins forecast raised some concerns. to our minds entails that the peak AMD said it expected adjusted gross margins to be about 33 percent in the sweet spot of firm growth and ample current quarter, compared with 34 percent in the first quarter. Revenue rose to liquidity is essentially peaking this $984 million in the first quarter, from $832 million a year earlier. Excluding spring.” items, the company lost 4 cents per share, in line with analysts' average esti- Looking at the surveys of loan offic- mate. ers by central banks in Japan, the • Aetna Inc (AET). The health insurer reported better-than-expected adjusted euro zone and the U.S. shows no earnings, helped primarily by strength in the U.S. health insurer's commercial real reason to expect an uptick in and government unit even as it continued to face pressure in its Obamacare either demand or availability of cred- business. Net loss was $381 million, or $1.11 per share, in the first quarter, it. And while consumers have still compared with a profit of $737 million, or $2.08 per share, a year earlier. Aet- added to loan balances at a healthy na said adjusted revenue fell 1.3 percent to $15.49 billion, but marginally pace in the U.S., there are signs that above estimates of $15.44 billion. some banks are becoming increas- • Agrium Inc (AGU). The farm retailer reported a smaller-than-expected loss ingly cautious, particularly in auto MORNING NEWS CALL - U.S. EDITION May 2, 2017 on Monday, helped by higher selling prices for potash. The Canadian compa- lending. ny sold 636,000 tonnes of wholesale potash in the first quarter at an average In the U.S. there is a possibility that of $208 per tonne, compared with 456,000 tonnes at $199 per tonne a year a loosening of regulation by the earlier. Agrium's retail sales fell 2.2 percent to $2.24 billion. On an adjusted Trump administration might also basis, it lost 7 cents per share, while analysts on average had expected a loss prime the credit pump, but, as with of 8 cents. all things in this administration, this • Archer Daniels Midland Co (ADM). The agricultural trader reported a 47 is a matter of speculation. Nor is it percent jump in first-quarter profit, as higher U.S. exports of corn and soy- clear that tax cuts or a foreign cash beans boosted volumes and margins. Net profit attributable to ADM rose to repatriation holiday would actually $339 million, or 59 cents per share, in the quarter, from $230 million, or 39 lead to capacity expansion by U.S. cents a share, a year earlier. Revenue rose to $14.99 billion from $14.38 bil- firms. lion. The last time the U.S. adjusted the • BP (BP). The oil and gas company's profit nearly tripled in the first quarter of tax system to put more cash in cor- 2017 from a year earlier, buoyed by rising oil prices and production that hit a porate coffers, it went more towards five-year high, while debt piled up in order to pay for acquisitions and costs for financial engineering, in the form of the 2010 Gulf of Mexico spill. Net debt rose 9 percent in the quarter to $38.6 share buybacks, than investment in billion, lifting BP's gearing of net debt to shareholders' equity from 26 percent plants or people. to 28 percent. BP took a pre-tax $917 million charge in the first quarter related to the spill, as total charges are expected to reach $4.5 billion to $5.5 billion FRUITS OF PARSIMONY this year. As for a fiscal expansion - probably • Coach Inc (COH). The companu posted an 8.6 percent jump in quarterly not coming in the euro zone or, in a profit, as the handbag maker cut back on discounting its products in the United meaningful way, in Japan. Trump on States. Net sales declined to $995.2 million in the third quarter ended April 1, Monday told Bloomberg he would from $1.03 billion a year earlier. Net income rose to $122.2 million, or 43 cents consider a rise in the gasoline tax to per share, in the quarter, from $112.5 million, or 40 cents per share, a year fund infrastructure spending, but earlier. Tuesday and Wednesday may bring • ConocoPhillips (COP). The company reported a quarterly profit, compared a different story. The Trump tax plan, with a year-earlier loss, helped by a gain on its sale of oil sands and western such as it is, would increase the defi- Canadian natural gas assets to Cenovus Energy Inc. Net profit was $800 mil- cit and place more cash in the hands lion, or 62 cents per share, in the first quarter, compared with a net loss of of the wealthiest, but this seems $1.5 billion, or $1.18 per share, a year earlier. ConocoPhillips' production, ex- more likely to drive prices in art and cluding Libya, rose 6 million barrels of oil equivalent per day to 1,584 million vacation homes than do much for boepd. overall output. That is if you expect • CVS Health Corp (CVS). The drugstore chain and pharmacy benefits man- the plan, as it is, to come to reality. ager reported a 17 percent drop in quarterly profit, as it filled fewer prescrip- It is hard, in sum, to bet that the U.S. tions at its pharmacies and lower traffic hurt sales at the front-end of its stores. gets a boost from a fiscal expansion. Net income attributable to CVS fell to $952 million, or 92 cents per share, in And don’t look to China for a credit- the first quarter, from $1.15 billion, or $1.04 per share, a year earlier. Revenue driven further expansion. China is rose 3 percent to $44.51 billion. not only tightening monetary condi- • Encana Corp (ECA). The oil and natural gas producer reported a better-than tions subtly, it appears to be getting -expected operating profit for the first quarter, helped by the rise in oil and gas serious about loose lending. The prices. Encana said it realized $43.45 per barrel of oil and natural gas liquids China Banking Regulatory Commis- production in the quarter ended March 31, compared with $33.09 a year ago. sion has been making pointed The company posted a net profit of $431 million for the first quarter, compared checks into bank risks and expo- with a loss of $379 million a year ago. On a per share basis, Encana reported sures from off-balance sheet lend- an operating profit of 11 cents, beating analysts' average estimate of 3 cents. ing, which has accounted for much • Hilton Worldwide Holdings Inc (HLT). The company reported better-than- of the credit growth there. Regula- expected quarterly earnings, and raised its full-year profit forecast, as more tors are also applying pressure in people booked rooms at its hotels at higher prices. Hilton said it now expects China to real estate lending, another 2017 earnings of $1.73-$1.81 per share, up from a prior forecast of $1.65- area which had driven growth, both $1.75 per share. Net income attributable to Hilton stockholders was $74 mil- in credit and economic output. lion, or 22 cents per share, in the quarter. The company reported net income A look at IMF estimates of capacity of $309 million, or 94 cents per share, a year earlier, reflecting $119 million of utilization in the main economies discontinued operations. Revenue jumped 25.2 percent to $2.16 billion. shows that most are running reason- • Merck & Co Inc (MRK). The company reported a 1.3 percent rise in quarter- ably high, in historical terms. This is ly revenue, helped by higher demand for its key immuno-oncology drug Key- the fruit of a much more aggressive truda. Net income attributable to Merck rose to $1.55 billion, or 56 cents per attitude towards capital expenditure share, in the first quarter, from $1.13 billion, or 40 cents per share, a year ear- and corporate management, one lier. Total revenue climbed to $9.43 billion from $9.31 billion. which, again, favors balance-sheet • Mosaic Co (MOS). The fertilizer maker reported a quarterly loss compared alchemy over investment in research to a year-ago profit, partly hurt by lower phosphate and potash prices and an or a company’s core franchise.

2 MORNING NEWS CALL - U.S. EDITION May 2, 2017 ammonia plant outage. Mosaic reported a net loss attributable to the company So, a bit of inflation will be added to of $900,000, in the first quarter, compared with a profit of $256.8 million, a the mix, though certainly not too year earlier. On a per share basis, the company broke even in the latest quar- much, especially as the Fed tries to ter, compared with a 73 cents profit last year. Mosaic recorded a $1 million both boost interest rates towards charge in the quarter, compared with a $169 million gain, a year earlier. Net 'normal' and begin to manage its sales of the world's largest producer of finished phosphate products fell 5.7 own balance sheet of acquired as- percent to $1.58 billion. sets downward. • Noble Energy Inc (NBL). The company on Monday reported a smaller-than- The upshot for markets is that risk expected adjusted quarterly loss as oil prices ticked up after a more than two- assets will face headwinds, with a year slump, offsetting a decline in production. Noble's total operating expenses best-case scenario perhaps being a fell 12.7 percent to $1 billion. On an adjusted basis, the company posted a set of tax cuts in the U.S. and a loss of 5 cents per share. Analysts on average had expected a loss of 14 surge in share buybacks. cents. Look around, and enjoy it; a gentle • Pfizer Inc (PFE). The drugmaker reported a 2.7 percent rise in quarterly slope it may be, but it is all downhill profit, helped by higher sales of breast cancer drug Ibrance. Net profit rose to from here. $3.12 billion, or 51 cents per share, in the first quarter, from $3.04 billion, or 49 cents per share, a year earlier. Revenue fell 1.7 percent to $12.78 billion. -- By James Saft • Shopify Inc (SHOP). The e-commerce software maker reported a 75 per- -- The opinions expressed here are cent jump in quarterly revenue, as more merchants used its platform to set up those of the author, a columnist for and manage online stores. Net loss widened to $13.6 million, or 15 cents per Reuters. share in the first quarter, from $8.9 million, or 11 cents per share, a year earli- -- At the time of publication James er. Revenue rose to $127.4 million from $72.7 million. Saft did not own any direct invest- ments in securities mentioned in this Deals article. He may be an owner indirect- • Dow Chemical Co (DOW). and Dupont (DD). China has conditionally ap- ly as an investor in a fund. proved the proposed merger between the companies, the country's Commerce Ministry said, a step forward for the deal whose closing has been repeatedly delayed by regulatory hurdles. The merger was approved by EU antitrust regu- lators in March on the condition the companies divest assets and research and development facilities. Regulators in the United States, Brazil, Australia and Canada are yet to clear the deal. • Tenet Healthcare Corp (THC). The U.S. for-profit hospital operator said it would sell three of its -based hospitals to larger rival HCA Holdings Inc. It said all of its hospitals and hospital-affiliated outpatient centers and em- ployed physicians would be phased back into insurer Humana Inc's network between June and October. Net loss attributable to Tenet's shareholders nar- rowed to $53 million, or 53 cents per share, in the first quarter, from $59 mil- lion, or 60 cents per share, a year earlier. Tenet's net operating revenue fell to $4.81 billion from $5.04 billion.

In other news • JPMorgan Chase & Co (JPM). Jamie Dimon, the chief executive officer and chairman of the company, on Monday railed against what he called excessive U.S. regulations and called on Washington to come together to build a more business-friendly economy that supports workers. "The real issue I'm worried about is bad public policy," Dimon said, speaking at the annual Milken Institute Global Conference. "We're leaving a lot of people behind." • Monsanto Co (MON). The company has terminated an agreement to sell its Precision Planting LLC farm equipment business to machinery maker Deere & Co, the companies said on Monday, ending a legal fight with antitrust authori- ties over the deal. "We just didn't see that there was a clear path going for- ward, that the DOJ was going to approve the transaction. We have a valuable business and people in limbo and it was just time to move on," Michael Stern, CEO of Climate Corporation, the Monsanto subsidiary that runs the Precision Planting business, said in an interview. Monsanto remains committed to selling the business to another buyer and said there has been "significant interest" from other buyers, Stern said. • Inc (UAL). The company executives will visit Capitol Hill to face lawmakers' questions about the forcible removal of a passenger on an overbooked flight last month, an incident that provoked international outrage. United Chief Executive 's appearance before the U.S. House

3 MORNING NEWS CALL - U.S. EDITION May 2, 2017

Transportation and Infrastructure Committee will test how the Republican-led Congress addresses company misconduct at a time of sweeping deregulation in Washington. Republicans largely back President Donald Trump's push to undo industry rules and regulations they say hamper business growth. Joining Munoz at the hearing will be United President Scott Kirby as well as execu- tives from , Southwest Airlines, Alaska Airlines and a con- sumers' union consultant.

ANALYSTS' RECOMMENDATION • Adobe Systems Inc (ADBE). Barclays starts coverage with overweight rat- ing; $155 price target expecting the business to grow for the next two years from creative cloud migration and marketing cloud strength. • Dish Network Corp (DISH). JP Morgan cuts target price to $81 from $85; rating overweight after the company reported weaker than expected quarter with softer financials and weaker than expected subscriber net adds. • Wesco International Inc (WCC). Morgan Stanley raises rating to overweight from equal-weight citing strong cyclical upside from continued recovery in US IP and capex activities.

ECONOMIC EVENTS 0945 ISM-New York Index for Apr: Prior 735.1 0945 ISM NY Business Conditions for Apr: Prior 56.5 1530 Domestic car sales for Apr: Expected 4.70 mln; Prior 4.59 mln 1530 Total vehicle sales for Apr: Expected 17.20 mln; Prior 16.62 mln 1530 Domestic truck sales for Apr: Expected 8.60 mln; Prior 8.65 mln 1530 All car sales for Apr: Prior 6.32 mln 1530 All truck sales for Apr: Prior 10.30 mln

S&P 500 COMPANIES REPORTING RESULTS Akamai Technologies Inc (AKAM). Expected Q1 earnings of 67 cents per share Anadarko Petroleum Corp (APC). Expected Q1 loss of 24 cents per share Apple Inc (AAPL). Expected Q2 earnings of $2.02 per share Assurant Inc (AIZ). Expected Q1 earnings of $1.52 per share Cummins Inc (CMI). Expected Q1 earnings of $1.81 per share DaVita Inc (DVA). Expected Q1 earnings of 81 cents per share Devon Energy Corp (DVN). Expected Q1 earnings of 40 cents per share Ecolab Inc (ECL). Expected Q1 earnings of 81 cents per share Envision Healthcare Corp (EVHC). Expected Q1 earnings of 77 cents per share FMC Corp (FMC). Expected Q1 earnings of 57 cents per share Gilead Sciences Inc (GILD). Expected Q1 earnings of $2.28 per share HanesBrands Inc (HBI). Expected Q1 earnings of 28 cents per share HCA Holdings Inc (HCA). Expected Q1 earnings of $1.76 per share HCP Inc (HCP). Expected Q1 earnings of 23 cents per share Martin Marietta Materials Inc (MLM). Expected Q1 earnings of 40 cents per share Mastercard Inc (MA). Expected Q1 earnings of 95 cents per share Mondelez International Inc (MDLZ). Expected Q1 earnings of 50 cents per share Newfield Exploration Co (NFX). Expected Q1 earnings of 44 cents per share ONEOK Inc (OKE). Expected Q1 earnings of 43 cents per share PG&E Corp (PCG). Expected Q1 earnings of 81 cents per share Pinnacle West Capital Corp (PNW). Expected Q1 earnings of 16 cents per share Verisk Analytics Inc (VRSK). Expected Q1 earnings of 79 cents per share Western Union Co (WU). Expected Q1 earnings of 39 cents per share

4 MORNING NEWS CALL - U.S. EDITION May 2, 2017

CORPORATE EVENTS 08:00 Becton Dickinson and Co (BDX). Q2 earnings conference call 08:00 Chemours Co (CC). Q1 earnings conference call 08:00 Merck & Co Inc (MRK). Q1 earnings conference call 08:00 NRG Energy Inc (NRG). Q1 earnings conference call 08:30 Aetna Inc (AET). Q1 earnings conference call 08:30 Ametek Inc (AME). Q1 earnings conference call 08:30 CDK Global Inc (CDK). Q3 earnings conference call 08:30 Charter Communications Inc (CHTR). Q1 earnings conference call 08:30 Coach Inc (COH). Q3 earnings conference call 08:30 CVS Health Corp (CVS). Q1 earnings conference call 08:30 Fidelity National Information Services Inc (FIS). Q1 earnings conference call 09:00 Ally Financial Inc (ALLY). Annual Shareholders Meeting 09:00 Altria Group Inc (MO). Q1 earnings conference call 09:00 Archer Daniels Midland Co (ADM). Q1 earnings conference call 09:00 Fortune Brands Home & Security Inc (FBHS). Annual Shareholders Meeting 09:00 Hubbell Inc (HUBB). Annual Shareholders Meeting 09:00 Mastercard Inc (MA). Q1 earnings conference call 09:00 Mosaic Co (MOS). Q1 earnings conference call 09:00 Noble Energy Inc (NBL). Q1 earnings conference call 09:00 Sabre Corp (SABR). Q1 earnings conference call 09:00 Scotts Miracle-Gro Co (SMG). Q2 earnings conference call 09:00 Spectrum Brands Holdings Inc (SPB). Q2 earnings conference call 09:00 UGI Corp and Amerigas Partners LP (UGI). Q2 earnings conference call 09:00 Vantiv Inc (VNTV). Annual Shareholders Meeting 09:00 Xylem Inc (XYL). Q1 earnings conference call 09:30 West Pharmaceutical Services Inc (WST). Annual Shareholders Meet- ing 10:00 Baxter International Inc (BAX). Annual Shareholders Meeting 10:00 Bristol-Myers Squibb Co (BMY). Annual Shareholders Meeting 10:00 Brixmor Property Group Inc (BRX). Q1 earnings conference call 10:00 Cummins Inc (CMI). Q1 earnings conference call 10:00 Enterprise Products Partners LP (EPD). Q1 earnings conference call 10:00 Equity LifeStyle Properties Inc (ELS). Annual Shareholders Meeting 10:00 Erie Indemnity Co (ERIE). Q1 earnings conference call 10:00 Hilton Worldwide Holdings Inc (HLT). Q1 earnings conference call 10:00 IPG Photonics Corp (IPGP). Q1 earnings conference call 10:00 Pfizer Inc (PFE). Q1 earnings conference call 10:30 National Retail Properties Inc (NNN). Q1 earnings conference call 11:00 Flowserve Corp (FLS). Q1 earnings conference call 11:00 Great Plains Energy Inc (GXP). Annual Shareholders Meeting 11:00 HCA Holdings Inc (HCA). Q1 earnings conference call 11:00 ManpowerGroup Inc (MAN). Annual Shareholders Meeting 11:00 Martin Marietta Materials Inc (MLM). Q1 earnings conference call 11:00 PG&E Corp (PCG). Q1 earnings conference call 11:00 Westlake Chemical Corp (WLK). Q1 earnings conference call 12:00 ConocoPhillips (COP). Q1 earnings conference call 12:00 Expeditors International of Washington Inc (EXPD). Annual Sharehold- ers Meeting 12:00 HCP Inc (HCP). Q1 earnings conference call 12:00 Pinnacle West Capital Corp (PNW). Q1 earnings conference call 13:00 EchoStar Corp (SATS). Annual Shareholders Meeting 13:00 Ecolab Inc (ECL). Q1 earnings conference call 14:00 Emerson Electric Co (EMR). Q2 earnings conference call 14:00 WEC Energy Group Inc (WEC). Q1 earnings conference call 16:30 Akamai Technologies Inc (AKAM). Q1 earnings conference call 16:30 DexCom Inc (DXCM). Q1 earnings conference call 16:30 Gilead Sciences Inc (GILD). Q1 earnings conference call 16:30 HanesBrands Inc (HBI). Q1 earnings conference call

5 MORNING NEWS CALL - U.S. EDITION May 2, 2017

16:30 Western Union Co (WU). Q1 earnings conference call 17:00 Apple Inc (AAPL). Q2 earnings conference call 17:00 DaVita Inc (DVA). Q1 earnings conference call 17:00 Envision Healthcare Corp (EVHC). Q1 earnings conference call 17:00 GoDaddy Inc (GDDY). Q1 earnings conference call 17:00 Mondelez International Inc (MDLZ). Q1 earnings conference call

EXDIVIDENDS There are no major exdivs for the day.

(All analysts' estimates are according to Thomson Reuters I/B/E/S)

(Compiled by Benny Thomas and Riniki Sanyal in Bengaluru) NEWS ACCESS MADE EASY Reuters Top News page displays a range of market and sector-specific subjects including: US, Europe and Asian companies, fixed income, credit, the global economy, emerging markets, corporate finance and industry sectors. For questions or comments about this report, contact: To access Reuters Top News [email protected] -- Thomson ONE: Click News tab, Select Front Page from top right, Click Top News. To launch a Co-branded Morning News Call from your firm, contact: [email protected] © 2017 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. Any copying, distribution or For more information about our products: redistribution of this content is expressly prohibited without the prior written thomsonreuters.com/products_services consent of Thomson Reuters. Thomson Reuters shall not be liable for any Or send us a sales enquiry at: errors or delays in content, or for any actions taken in reliance thereon. Thom- thomsonreuters.com/products_services/financial/contactus/ son Reuters and its logo are registered trademarks or trademarks of the Thom- son Reuters group of companies around the world.

6