Global Research

July 10, 2013

MID-YEAR UPDATE

Altera Corporation Protective Life (ALTR:NASDAQ) Corporation Equinix (PL:NYSE) AmerisourceBergen (EQIX:NASDAQ) Corp. Tractor Supply Co. (ABC:NYSE) Jabil Circuit, Inc. (TSCO:NASDAQ) (JBL:NYSE) Bed Bath & Beyond Trinity Industries, Inc. (BBBY:NASDAQ) Nuance (TRN:NYSE) Communications, Inc. Ctrip.com (NUAN:NASDAQ) Zions International, Ltd. Bancorporation (CTRP:NASDAQ) (ZION:NASDAQ)

© 2013 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved. International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863

Contents

Letter to Investors ...... 1

Mid-Year Results ...... 2

Equity-Linked Note ...... 4

Statistical Overview ...... 5

Company Overviews

Altera Corporation ...... 6

AmerisourceBergen Corp...... 7

Bed Bath & Beyond ...... 8

Ctrip.com International, Ltd...... 9

Equinix ...... 10

Jabil Circuit, Inc...... 11

Nuance Communications, Inc...... 12

Protective Life Corporation ...... 13

Tractor Supply Co...... 14

Trinity Industries, Inc...... 15

Zions Bancorporation ...... 16

Please read disclosure/risk information and Analyst Certification beginning on page 17.

Analysts’ Best Picks® for 2013

2013 Analysts’ Best Picks® Mid-Year Assessment July 10, 2013 Dear Investors, U.S. equity markets were fairly strong following the release of the 2013 Analysts’ Best Picks® (ABP) list on December 10, 2012 (stocks were priced as of the close of 12/6/12) and continued to advance through June 28, 2013, with the S&P 500 up 15.0% on a total return basis and the ABP13 list up 25.9% on the same basis for this six-month plus three-week period.

The challenge with any non-actively managed list like ABP is to have stocks selected which collectively perform better than the S&P 500 over the measured period. Fortunately, the 2013 list is meeting this test to date. For the period ending June 28, 2013, the Analyst Best Picks® list has strongly outperformed the S&P 500 on a total return basis. Since the initial pricing of the 2013 Analyst Best Picks® list on December 6, 2012, through the close on June 28, 2013, seven of the eleven ABP13 stocks outperformed the S&P 500 on a total return basis, with the following six stocks up 20%+: AmerisourceBergen Corp. (ABC, up 32.2%), Bed Bath & Beyond (BBBY, up 22.6%), Ctrip.com International, Ltd. (CTRP, up 80.6%), Protective Life Corporation (PL, up 43.7%), Tractor Supply Co. (TSCO, up 39.5%), and Zions Bancorporation (ZION, up 48.3%). The four underperformers were: Altera Corporation (ALTR, up 6.5%), Equinix (EQIX, down 1.2%), Jabil Circuit (JBL, up 11.0%), and Nuance Communications (NUAN, down 16.1%).

Since the inception of the ABP13 list in early December 2012, two of the stocks have been downgraded from Strong Buy (Trinity Industries on 2/20/13 and Nuance Communications on 5/1/13). It should be noted that stocks are not removed from the list if they are downgraded and remain in the performance data until the end of the period, in this case as of 12/31/13. We’ve had no acquisitions or announcements of intent by a third-party acquirer for any of the ABP13 selections as of this writing.

Since the initial launch of the Analysts’ Best Picks® list in December of 1995, the ABP lists have outperformed the S&P 500 in 15 of the last 18 years, including the 2013 list to date. Historically, this list has benefitted from: (1) careful selection based on expected sustainable or improving business trends and favorable earnings growth prospects in combination with accurate valuation assessments of the stocks’ appreciation potential and (2) greater emphasis on balance sheet strength, cash flows, and capital-raising options to assess the ability to grow and thrive under current capital markets and still somewhat constrained credit market conditions.

Investors should be aware that prospects for 2H13 may be constrained by slow U.S. GDP growth, erratic consumer spending, and the continuation of the financial drama that has beset Europe and, to a lesser degree, many countries in the Far East. Analysts’ assessments, ratings, and price targets attempt to determine company growth outlooks and potential stock valuations while making judgments about the relative attractiveness of individual stocks versus their peer group and versus the S&P 500. Economic uncertainties in Europe, the Far East, and other regions throughout the world have increased the risks associated with these forward-looking estimates and outcomes. Additionally, U.S. equity markets have been adjusting to statements by Fed Chairman Ben Bernanke that monetary policy will be less focused on keeping interest rates low in the months ahead, as the yield on the 10-year U.S. Treasury bond has increased recently to 2.64% from 2.13% on May 31.

According to the latest analysts’ consensus from S&P Index Services, the S&P 500 operating EPS growth is expected to improve from 5.0% in 1H13 (versus a 1H12 comparison) to 20.9% in 2H13 (versus 2H12 comparisons, which included an operating EPS decline of 2.4% in 4Q12). S&P 500 operating EPS growth in 2014 is currently projected to strengthen by 12.7%, according to current aggregate analyst estimates, and increase by 13.7% according to the latest projections by strategists and economists. This earnings optimism shown by both analysts and strategists remains aggressive given the weak economic trends in both the U.S. and most foreign markets. The positives are: improving overall business spending, stable to lower oil prices, and improving housing and multi-family prices and stronger new housing construction activity that has begun. Slow employment growth in the private sector continues, with moderate growth in salary and wages. Financial institutions’ constraints on consumer borrowing for many continue, but for some borrowers, credit availability is selectively improving. Investment opportunities still exist, as evidenced by the superior six-month performance of the 2013 Analysts’ Best Picks® recommendations as discussed in this report.

The latest analysts’ comments on the eleven ABP13 names are provided in the following pages.

David A. Henwood, CFA, Chief Investment Officer

Analysts’ Best Picks® for 2013 1

2013 Analysts’ Best Picks® Mid-Year Results

Current Total 12/06/12 6/28/13 Price Only Dividends Dividend Return Company Symbol Analyst Price Price % Change Paid Yield % YTD %

Altera Corporation ALTR Mosesmann $31.16 32.99 5.87 $0.200 0.64 6.51

AmerisourceBergen Corp. ABC Ransom $42.56 55.83 31.18 $0.420 0.99 32.17+

Bed Bath & Beyond Inc. BBBY Bugatch $57.87 70.95 22.60 $0.000 0.00 22.60+

Ctrip.com International CTRP Kessler $18.07 32.63 80.58 $0.000 0.00 80.58+

Equinix Inc. EQIX Louthan $186.86 184.72 -1.15 $0.000 0.00 -1.15

Jabil Circuit Inc. JBL Alexander $18.50 20.38 10.16 $0.160 0.86 11.03

Nuance Communications (b) NUAN Patil (a) $21.92 18.40 -16.06 $0.000 0.00 -16.06

Protective Life Corp. (c) PL Schwartz $26.99 38.41 42.31 $0.380 1.41 43.72+

Tractor Supply Co. TSCO Wewer $84.60 117.55 38.95 $0.460 0.54 39.49+

Trinity Industries (d) TRN Hatfield $33.00 38.44 16.48 $0.220 0.67 17.15+

Zions Bancorporation ZION Long $19.54 28.92 48.00 $0.050 0.26 48.26+

Average Price Per Selection $49.19 $58.11 0.49%

Best Picks Average Change 25.36% 25.85%

S&P 500 SPX 1,413.94 1,606.28 13.60% 1.40% 15.01%*

Performance Differential 11.75% 10.84%

Percent of Picks outperforming S&P (as of 6/28/13) 63.64%

+ = Outperforming S&P 500 Note: The performance data on Analysts' Best Picks® is on a total return basis before commissions and/or fees. Note: Stocks continue on the list until EOY 2013, even if downgraded, unless the corporation is acquired. a Shyam Patil left the firm 4/19/13. b NUAN changed to Suspended on 4/22/13 following analyst departure/transfer of coverage. Downgraded to MP3 by Tavis McCourt on 5/1/13. c PL downgraded to MO2 on 4/9/13; upgraded to SB1 on 4/12/13. d TRN downgraded to MO2 on 2/20/13.

* S&P total return with gross dividends reinvested is from Bloomberg LLC.

Analysts’ Best Picks® for 2013 2

Results if bought at the close of the day following release

Current Total 12/11/12 6/28/13 Price Only Dividends Dividend Return Company Symbol Analyst Price Price % Change Paid Yield % YTD %

Altera Corporation ALTR Mosesmann 33.08 32.99 -0.27 $0.200 0.60 -0.33

Amerisource Bergen Corp. ABC Ransom 43.12 55.83 29.48 $0.420 0.97 30.45 +

Bed Bath & Beyond Inc. BBBY Bugatch 58.25 70.95 21.80 $0.000 0.00 21.80 +

Ctrip.com International CTRP Kessler 19.41 32.63 68.11 $0.000 0.00 68.11 +

Equinix Inc. EQIX Louthan 198.26 184.72 -6.83 $0.000 0.00 -6.83

Jabil Circuit Inc. JBL Alexander 18.99 20.38 7.32 $0.160 0.84 8.16

Nuance Communications (b) NUAN Patil (a) 22.42 18.40 -17.93 $0.000 0.00 -17.93

Protective Life Corp. (c) PL Schwartz 28.73 38.41 33.69 $0.380 1.32 35.02 +

Tractor Supply Co. TSCO Wewer 86.27 117.55 36.26 $0.460 0.53 36.79 +

Trinity Industries (d) TRN Hatfield 34.24 38.44 12.27 $0.220 0.64 12.91

Zions Bancorporation ZION Long 20.48 28.92 41.21 $0.050 0.24 41.46 +

Average Price Per Selection $51.20 $58.11 0.47%

Best Picks Average Change 20.46% 20.93%

S&P 500 SPX 1427.84 1606.28 12.50% 1.37% 13.87%*

Performance Differential 7.97% 7.07%

Percent of Picks outperforming S&P (as of 6/28/13) 54.55%

* S&P total return with gross dividends reinvested is from Bloomberg LLC.

Since 1996, and excluding ABP13, a total of 197 stocks have been recommended through the Analysts’ Best Picks® list. Of this total, 132 advanced (67%) and 65 declined (33%) within the recommended holding period. The holding period for each year’s list is approximately 55 weeks from the inception date to 12/31 of the following year. An investor would incur commissions (and interest charges if transacted in a margin account) to transact these recommendations. The results presented should not and cannot be viewed as an indicator of future performance. Individual results will vary and transaction costs related to investing in these stocks will affect overall performance. The market value of securities fluctuates and investors may incur profits or losses.

Analysts’ Best Picks® for 2013 3

Equity-Linked Note

Raymond James is again pleased to have offered an equity-linked note designed to offer our retail clients a vehicle to invest in the names on the Analysts’ Best Picks® (ABP) report published by our Equity Research department. This year we created two distinct notes, one issued to the public near the release of the list in December and a second approximately one month later (both issued by Bank of Montreal). The notes were structured to offer clients with $10,000-75,000 the ability to invest in the ideas in a more cost-efficient manner than purchasing the stocks individually. The following paragraphs review the performance of the notes through June 28, 2013, in comparison to the returns of the broader equity markets.

Each client’s specific return on each note will depend on how many notes were purchased originally, as the impact of the $4.95 ticket charge will vary as the number of notes changes. Comparisons of this year’s notes (assuming a $10,000 notional investment) versus the major equity indices are illustrated in the following table. Investors can review the discussions from our Equity Research analysts in this mid-year update to better understand all of the factors affecting ABP13. As with any year, the list is intended to be a selection of stocks that our research analysts believe will outperform the broader equity markets for a one-year period. The final performance of this year’s note will be determined by what happens between now and the end of the year.

Cost Price % Change The ABP list as published by the Equity Research depart- 2013 ABP Note (Dec 11)* 102.7995% 120.94% 17.65% ment shows a total return of 25.9% using the closing prices from December 6, 2012, as the cost basis. The S&P 500 Index 1,427.84 1,606.28 13.87% performance differentials between the returns are NASDAQ Composite 3,022.30 3,403.25 13.51% comprised of two factors: commissions and varying dates Russell 2000 Index 834.99 977.48 18.09% of initiation. When comparing returns, it is important to 2013 ABP Note (Jan 15)* 102.7995% 112.40% 9.34% consider equivalent periods of investment. In the S&P 500 Index 1,472.34 1,606.28 10.19% performance chart to the right, we have included NASDAQ Composite 3,110.78 3,403.25 10.08% comparable performance figures for selected indices Russell 2000 Index 884.60 977.48 11.22% based on the specific investment period of each note. *Indices’ performance as of the listed trade date for each security

The first factor in the spread is the commissions paid on the note. Investors in the note paid 2.75% in upfront commissions along with a $4.95 ticket charge. Thus, the return shown in accounts is reflective of a $1,027.50 investment per note ($1,000 * 1.0275) plus $4.95. We limit the quantity of notes that can be purchased by any one account to a notional range of $10,000-75,000. We developed this range by comparing the fees to buy the individual stocks versus the note. The notes cost investors less assuming standard commission levels. As is consistent with most research reports across the Street, commissions are ignored when computing returns. This is based on commissions varying widely across different types of accounts. Issues such as institutional versus retail accounts, fee-based versus commission-based accounts, and full commissions versus different discount rates all make it difficult to choose an appropriate level of fees to build into a report that would apply to the various recipients of our research.

The other factor in the spread is the difference in cost basis recognized by Equity Research versus what is achieved in the notes. When the report is published, Research must choose a price for calculating returns, and no matter what day or price is used, there will always be a difference between that return and what investors actually receive. Equity Research is using the closing price from Thursday, December 6, 2012. This is prior to the list’s announcement day of Monday, December 10, 2012. The cost basis received by investors who purchased these notes is based on three trading days starting on the trade date of each note (December 11, 2012, and January 15, 2013, respectively). While the cost difference will vary from year to year, we continue to make improvements to the process with hopes that this spread will remain as low as possible on an annual basis.

Equity Linked Securities Equity Capital Markets Ext. 71857

Please note that the prices shown for the 2013 ABP Notes in this report are NAV and the price shown on client statements is a bid price which includes the spread on the security. Clients who hold to maturity will receive the NAV. The NAV represents the underlying value of the securities less the counterparty fee of 25 bp which is taken at maturity or early redemption.

Analysts’ Best Picks® for 2013 4

Analysts’ Best Picks for 2013 Statistical Overview 12 Mo. Trail. Proj. 12- Current Mkt. RJ&A 07/08/2013 Price Range Mo. Price Year Div. BV/ Cap. Company Name Sym. Rank SR Close High Low Target P/E 2012A 2013E 2014E Yld. Shr. FY (Mil)

S&P 500 # SPX NA NA 1640.46 1687.18 1325.41 NA 15.0x 96.82 109.16 123.01 2.1% NA Dec NA

Altera Corporation (g,m,o) ALTR 1 AG 33.03 38.80 29.59 39.00 23.3x 1.72 1.42 1.86 1.8% 10.68 Dec 10,669

AmerisourceBergen Corp. (m,ng,o) ABC 1 G 56.28 56.91 36.73 63.00 18.5x 2.89 3.05 3.55 1.5% 10.00 Sep 13,203

Bed Bath & Beyond (f,g,m,o,s) BBBY 1 G 73.81 74.04 54.33 85.00 14.9x 4.56 4.94 5.41 0.0% 18.59 Feb 16,348 Ctrip.com International, Ltd. CTRP 1 AG 32.10 35.33 12.36 37.00 24.3x 1.22 1.32 1.55 0.0% 9.70 Dec 4,626 (m,ng,o,r) Equinix (g,m,o) EQIX 1 AG 185.54 231.56 158.98 245.00 61.6x 2.64 3.01 3.88 0.0% 43.79 Dec 9,926

Jabil Circuit, Inc. (m,ng,o) JBL 1 AG 20.38 23.95 16.39 24.00 11.0x 1.95 1.86 2.35 1.6% 10.63 Aug 4,231 Nuance Communications, Inc. NUAN 3 AG 19.05 25.89 18.00 NM 13.9x 1.73 1.37 1.47 0.0% 8.54 Sep 6,220 (h,hs,m,ng,o) Protective Life Corporation PL 1 AG 40.05 40.32 24.67 46.00 10.0x 3.75 3.98 4.70 2.0% 57.89 Dec 3,140 (h,hn,m,ng,o) Tractor Supply Co. (g,hs,m,o) TSCO 1 AG 119.14 120.50 75.46 123.00 26.8x 3.80 4.45 5.13 0.9% 14.55 Dec 8,435

Trinity Industries, Inc. (m,ng,o) TRN 2 AG 35.76 45.67 21.53 47.00 8.9x 3.19 4.00 4.50 1.5% NM Dec 2,922

Zions Bancorporation (m,ng,o) ZION 1 AG 31.16 31.40 17.58 36.00 17.0x 1.77 1.83 2.07 0.5% 27.43 Dec 5,740

# - S&P 500 EPS estimates are bottom up operating estimates from S&P. f - Fiscal years ending before May are treated as previous year. g - EPS is GAAP EPS. h - Raymond James & Associates managed/co-managed a public/follow-on offering of these shares or has provided investment banking services within the past 12 months. hn - Raymond James & Associates received non-securities-related compensation from these stocks within the past 12 months. hs - Raymond James & Associates received non-investment banking securities-related compensation from these stocks within the past 12 months. m - Raymond James & Associates makes a market in shares of these stocks. ng - EPS is Non-GAAP EPS. o - Security is optionable. r - Figures are based on ADRs/ADSs. s - The analyst or research associate own shares of stock in this company.

Analysts’ Best Picks® for 2013 5

Altera Corporation (ALTR:NASDAQ)

12-Month Target Price ...... $39.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $33.03 Hist. 12-month Price Range ...... $38.80 - $29.59 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.60 / 1.8% Market Capitalization (mil.) ...... $10,669 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 323.0 EPS $1.72 $1.42 $1.86 Book Value (03/13) ...... $10.68 P/E 19.2x 23.3x 17.8x ROE (TTM) ...... 14% Revenue (mil.) $1,783 $1,746 $2,000 LT Debt (mil) ...... $500/10%

Altera Corporation, headquartered in San Jose, California, designs, manufactures, and markets high-performance, high-density programmable logic devices (PLDs), intellectual property cores, and associated development tools. The company serves the telecommunications, data communications, electronic data processing, computer peripheral, and industrial markets.

Underappreciated Growth Story… With a Dividend

Altera should benefit from a number of key growth/margin drivers, including 1) dollar content expansion in next-generation wireless equipment; 2) larger “chips” such as field-programmable gate arrays (FPGAs) that have a structural advantage over smaller chips such as application specific standard products (ASSPs) as Moore’s law starts to slow; 3) FPGAs will continue gaining share over custom application-specific integrated circuit (ASIC) chips; and 4) Altera and Xilinx (XLNX/$39.81/Outperform) are engaged in a benign duopoly in FPGAs, with both players gaining share vs. ASSP and ASIC solutions with a market opportunity exceeding $50 billion.

FPGA growth opportunity is underappreciated. We believe Altera is in a prime position to outgrow the semiconductor industry over the next several years as FPGAs have become more economically viable than other more standardized products in an increasing number of instances. Mainly, FPGAs have significantly larger die sizes as opposed to ASSPs, which gives Altera two primary advantages over the next several years. First, the smaller die size for ASSPs will allow for limited cost scaling when transitioning to lower process nodes as yields per wafer are already structurally higher. Moreover, the larger die size for FPGAs offers more opportunity to integrate additional functionality into the chip, while ASSPs should be relatively limited in this capacity. This gives us confidence that Altera will be able to gain shares from ASSPs over time while maintaining its gross margin profile in the mid- to high 60-65% range. Gartner also endorses our above-market forecast for FPGAs, indicating that FPGAs should grow at a 9% CAGR through 2017 vs. mid-single-digit growth for ASICs and ASSPs.

Cyclicality should improve in 2H13. While semiconductor sales (according to SIA) have decelerated through most of 2013, we note that May sales figures marked an inflection point, and we expect growth rates to improve in the back half of the year. Assuming normal seasonality for the rest of the year, growth should accelerate into 3Q13 and into 4Q13, for full-year growth in the mid- to high-single digits. This projection, along with Gartner’s forecast for FPGA growth of 2% in 2013, compares favorably to current consensus that calls for a 1% y/y decline in 2013. For Altera specifically, cyclical pressures have continued with a book to bill that has remained below 1 for four consecutive quarters while channel inventory is at or near historic lows. We see 2H13 cyclical catalysts led by an increase in wireless capex as LTE rollouts take shape, including a planned base station build at China Mobile. With 45% exposure to the communications vertical, we believe any broad- based pick-up in spending would be a notable positive and could lead to multiple expansion in addition to upwardly revised estimates.

Valuation overly discounts cyclical pressures. ALTR currently trades at ~18x our 2014 EPS estimate of $1.86, which represents a ~5% discount to the five-year average of 18.8x. We believe the company’s growth prospects (as mentioned above) and the opportunity to take share from ASICs/ASSPs are much greater than in past years given that FPGAs are now at process node parity. Our price target of $39.00 assumes a ~21x multiple off of our 2014 EPS estimate of $1.86. While this multiple is slightly above the company’s five-year average of 18.8x, we note that earnings are currently cyclically depressed, and we believe that a higher-than-average valuation is likely warranted.

Hans Mosesmann

Analysts’ Best Picks® for 2013 6

AmerisourceBergen Corp. (ABC:NYSE)

12-Month Target Price ...... $63.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $56.28 Hist. 12-month Price Range ...... $56.91 - $36.73 Suitability ...... Growth Dividend/Yield ...... $0.84 / 1.5% Market Capitalization (mil.) ...... $13,203 FY (Sep) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 234.6 EPS $2.89 $3.05 $3.55 Book Value (03/13) ...... $10.00 P/E 19.5x 18.5x 15.9x ROE (TTM) ...... 28% Revenue (mil.) $78,912 $87,330 $113,933 LT Debt (mil) ...... $1,396/37% Non-GAAP EPS excludes discontinued operations and non-recurring items. AmerisourceBergen Corp., headquartered in Chesterbrook, Pennsylvania, is the largest full-service wholesale distributor of pharma products and related healthcare services in the U.S., serving customers through numerous distribution facilities and specialty products distribution facilities. The company offers a broad range of services designed to enhance the operating efficiencies and the competitive positions of its customers and suppliers.

Long-Term Outlook Remains Bright With Generics, Walgreen Contract

While AmerisourceBergen has outperformed its peers year-to-date [29% vs. 18% average return for Cardinal/McKesson (MCK/$115.94/Market Perform)] and faces another quarter or two of difficult comparisons, we still believe the company represents an attractive investment opportunity given accelerating EPS growth in 2014 alongside the improved generic calendar, the initial Walgreen (WAG/$45.33/Outperform) contract tailwind, accretion from healthcare reform, and the capital deployment optionality.

Generics and specialty to drive margin expansion. While recent re-pricings and the Walgreen contract win represent a short- term hurdle to overcome in FY14, we believe ABC can drive consistent margin expansion over time through a combination of above-average growth in its industry-leading specialty Rx franchise and continued focus on holding expenses flat to down on an organic basis. In addition, the generic wave should reaccelerate in 2014, and the final SAP implementation in late FY14 should yield significant savings over time, both of which should drive additional margin gains as the company looks to return to high-single-digit basis point (bp) margin improvement per annum in FY15 and beyond. This, coupled with capital deployment, should yield mid-teens EPS in each of the next three years, the best among peers.

Walgreen contract provides significant opportunity for growth. ABC has already quantified FY14 EPS accretion at $0.20. By FY16, we believe the prime vendor contract will be more steady state and represent ~$0.40 of EPS, assuming a 10 bp improvement in EBIT margins to 45 bp (on $33-34 billion in prime vendor revenue) from lower one-time costs from the contract, increased distribution efficiency (90% utilization), and the inclusion of the generic book. Unfortunately, the impact from joining the Walgreen/Alliance Boots generics joint venture in Bern, Switzerland, is more challenging to quantify; based on all of the relevant commentary, we estimate an additional 2-4% savings on ABC’s generic book of business in FY16. While some of the ABC benefit will be passed on to Walgreen and other ABC customers, we expect $150 million of EBIT to be kept by Amerisource in FY16, or $0.40 of EPS accretion, matching the prime vendor accretion. Management has suggested more contribution from the JV vs. prime vendor, suggesting some level of conservatism on our part. In total, we estimate $0.80-1.00 of incremental EPS from this contract relative to the original baseline, offering significant EPS growth potential from now through FY16.

Strong balance sheet and cash flow will boost shareholder returns. AmerisourceBergen boasts a healthy balance sheet and significant FCF generation, which has helped boost shareholder returns via dividends and share repurchases. While the warrants associated with the Walgreen contract represent a headwind, we believe the share count can continue to decline and there is optionality should management look to become more aggressive with regard to M&A, which is excluded from our model.

Valuation remains reasonable. ABC trades at ~15x CY14E EPS, a two-turn premium to its peers and at the high end of its recent trading range. While the stock has outperformed to date, ABC has an above-average peer group growth rate and has significant catalysts to consider as we approach 2014/2015 (Walgreen contract, generic pipeline, healthcare reform). Our $63.00 price target represents ~17x CY14, but is more reflective of the reacceleration of growth in the out-years as the Walgreen contract ramps. John W. Ransom

Analysts’ Best Picks® for 2013 7

Bed Bath & Beyond (BBBY:NASDAQ)

12-Month Target Price ...... $85.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $73.81 Hist. 12-month Price Range ...... $74.04 - $54.33 Suitability ...... Growth Dividend/Yield ...... $0.00 / 0.0% Market Capitalization (mil.) ...... $16,348 FY (Feb) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 221.5 EPS $4.56 $4.94 $5.41 Book Value (06/13) ...... $18.59 P/E 16.2x 14.9x 13.6x ROE (TTM) ...... 26% Revenue (mil.) $10,915 $11,670 $12,123 LT Debt ...... $0/0% Fiscal years ending before May are treated as previous year. Bed Bath & Beyond, headquartered in Union, New Jersey, is the nation`s largest specialty retailer of better-quality domestic merchandise and home furnishings. It offers a broad and deep assortment of merchandise through about 1,000 Bed Bath & Beyond stores and on its www.bedbathandbeyond.com website. The company also operates 266 Cost Plus World Market stores (home furnishings and specialty consumables), 73 Christmas Tree Shops or andThat! stores (gifts and decor), 48 Harmon Stores (health and beauty), and 83 buybuy BABY stores (a retailer of infant and toddler merchandise).

Benefits From Acquisitions and Investments Remain in 2H12 & Beyond

Through the first half of 2013, investors started to embrace several positive aspects of the Bed Bath & Beyond investment thesis. Simultaneously, fears about its vulnerability to online-only retailers appear to have abated somewhat, as the company generated continued positive comparable-store sales and began posting less volatile gross margins. To wit, the shares are up about 23% since they were added to the Analysts’ Best Picks® list in December 2012.

Looking ahead, we continue to believe that the shares offer further upside as: (1) the acquisitions of Cost Plus and Linen Holdings impact reported results more visibly, (2) continuing improvements in its ecommerce efforts bear more fruit, and (3) reported results - now starting to compare against more reasonable hurdles - deliver further improvement. In our opinion, the shares’ valuation remains compelling given our positive view of the company’s business model and management team.

Bed Bath & Beyond acquired both Cost Plus World Market and Linen Holdings, Inc. almost exactly a year ago, in July 2012. As it begins “lapping” prior-year results that included each acquisition’s last-year results, its performance will be more comparable, and investors will get a more accurate picture of the value added from both. Our guess is that comparable- store sales in the Cost Plus concept have been outpacing the corporate average for the last few quarters but were not reflected in reported comps since they won’t be treated as comparable stores until they have been in the system for a full year. We expect this benefit to be more visible in 2H13.

A well-publicized aspect of the “bear” case against Bed Bath & Beyond has been that it remains very vulnerable to online- only retailers given its branded (and not highly exclusive) merchandise offering and its above-peer-average operating margins. We believe that this thesis fails to appreciate: (1) consumers’ wide range of preferences in terms of shopping experience and fulfillment, (2) Bed Bath & Beyond leadership’s commitment to its own ecommerce efforts, (3) the in-store experience at Bed Bath & Beyond and its ancillary concepts, and (4) the narrower-than-often-perceived pricing variance between Bed Bath & Beyond and its online-only competitors. As the company continues to reimage and improve its Websites, we expect ecommerce to become a more meaningful contributor to its financial results.

The shares now trade at 13.6x our FY14 EPS estimate of $5.41 versus the 17x 10-year median forward multiple. Our $85.00 target price represents 15.7x our FY14 EPS estimate and is supported by our EVA/FCF calculation of intrinsic value as shown on page eight of our last comment, “Sales and Gross Margin Beat Offset by Higher SG&A Investment; We’re Still Buyers,” on June 27, 2013. Budd Bugatch, CFA

Analysts’ Best Picks® for 2013 8

Ctrip.com International, Ltd. (CTRP:NASDAQ)

12-Month Target Price ...... $37.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $32.10 Hist. 12-month Price Range ...... $35.33 - $12.36 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.00/0.0% Market Capitalization (mil.)...... $4,626 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 168.4 EPS $1.22 $1.32 $1.55 Book Value (03/13) ...... $9.70 P/E 26.3x 24.3x 20.7x ROE (TTM) ...... 10% Revenue (mil.) $661 $821 $978 LT Debt (mil.) ...... $180/15% Non-GAAP EPS excludes stock-based compensation and other one-time items. Figures are based on ADRs/ADSs. Commencing operations in 1999, Ctrip.com International, Ltd. is the leading travel consolidator in China, offering hotel rooms, airline tickets, and packaged tours through its call center and websites. Ctrip.com primarily targets its services at FITs (frequent independent travelers) consisting of business and leisure travelers. Ctrip.com typically serves in an agency role and does not assume any inventory risk. Ctrip.com generates fees from commission from hotels and air bookings. In 2011, Ctrip.com generated approximately 40% of revenues from hotel bookings and 39% of revenues from air ticketing.

Expect Solid Growth With Stabilizing Margins to Serve as Catalyst

While CTRP shares underperformed in 2012 due to increasing competition and the resulting lower operating margins, we believe stabilizing margins, solid revenue growth, moderation in the promotional environment, and share buybacks should serve as catalysts for shares.

Expect 20% long-term revenue growth. We expect 20% long-term revenue growth for Ctrip, driven by 1) growth of the overall travel market in China, which we expect to increase ~10% annually, led in part by an expanding middle class; 2) growth of Internet penetration at ~40% today in China; 3) growth of Ctrip’s hotel business through additional supply relationships and expansion into second-tier cities; 4) growth of packaged tours and corporate travel; and 5) new product introductions such as travel reviews, opaque travel, and travel insurance. We are modeling 2013 currency-neutral revenue growth of 23%, which we believe could prove conservative.

Expect competitor discounting to moderate. Since 4Q11, Ctrip has seen more aggressive promotional hotel pricing, specifically from eLong, Ctrip’s primary competitor in China. We would note that some hotels have recently pulled out of the e-couponing program, which we believe is a positive for Ctrip margins going forward. In addition, eLong recently indicated that the highly promotional environment has essentially hit a price wall and that the company plans to scale back its e-couponing program going forward. We believe eLong’s plan to ease its promotional strategy will enable Ctrip to reduce its couponing efforts, and we believe operating margins should bottom in 2013.

Share repurchases should support shares. In September 2012, Ctrip completed a $180 million convertible senior note offering due 2017 (including $20 million of overallotments), of which $55 million was purchased by senior management and directors of Ctrip. The company indicated that one of the primary reasons for the offering was share buybacks, which it estimates will result in EPS accretion of ~5% (buying stock at ~$17 and effective conversion price of $26 through call spread). At the end of 1Q13, Ctrip still had ~$260 million available for repurchases.

Attractive valuation. Shares of CTRP are currently trading at ~21x 2014E non-GAAP EPS of $1.55, slightly below the two-year forward P/E mean of 22x (range of 10-28x), or ~16x excluding cash and investments. Our $37.00 target price is based on ~24x 2014E non-GAAP EPS of $1.55 or 20x EPS plus cash and investments of $9/share. We believe a 20x multiple is warranted given our outlook for 20% long-term EPS growth, equating to a PEG of 1.0.

Aaron Kessler, CFA

Analysts’ Best Picks® for 2013 9

Equinix (EQIX:NASDAQ)

12-Month Target Price ...... $245.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $185.54 Hist. 12-month Price Range ...... $231.56 - $158.98 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.00 / 0.0% Market Capitalization (mil.) ...... $9,926 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 53.5 EPS $2.64 $3.01 $3.88 Book Value (03/13) ...... $43.79 P/E 70.3x 61.6x 47.8x ROE (TTM) ...... NM Revenue (mil.) $1,896 $2,190 $2,529 LT Debt (mil) ...... $3,710/49%

Equinix, headquartered in Foster City, California, provides carrier neutral data center solutions, primarily colocation and interconnection, to enterprises, content and digital media providers, system integrators, and network providers in major metropolitan markets in the U.S. and abroad. The company operates data centers on a global basis in 32 markets over 5 continents through a combination of company owned and leased facilities.

Ride Equinix Into 2013

Data center valuations have declined recently, for reasons we view as being unrelated to the fundamental strong positioning of the sector. Rising interest rate concerns in June impacted real estate values while concern over delays in obtaining REIT status by the IRS contributed to a recent sell off. We view both as unrelated to the core valuation of the data center business, as colocation facilities are far removed from real estate trends, despite their ability to gain REIT status. Our conversations with people in Washington leave us firmly convinced that Equinix can obtain REIT status, which should be a catalyst for share price appreciation. Quite simply, it’s a different type of asset. Beyond that, channel checks in late June indicated that the favorable drivers for the data center space remain in place. Growth in Internet traffic and related commerce, and the corresponding need for this traffic to be economically and efficiently stored, hosted, and exchanged, continue to drive demand for highly specialized and strategically located data centers. Dominant position. Equinix has maintained its dominant position in the U.S. colocation market and remains one of the only colocation providers that can offer its services on a global level (in 32 markets spanning 15 countries and five continents). These factors, combined with the company’s large base of customers (over 4,000) and interconnection ecosystems, give Equinix a significant advantage as it would be very difficult for new entrants to match this scale. Balance sheet. Equinix’s balance sheet remains strong, as the company has $1.8 billion in cash and short-term investments and $4.5 billion in debt. Equinix is currently 2.7x levered, giving the company ample room to pursue acquisitions and organic growth opportunities. Conclusion. Our $245.00 price target is based on 13.3x our 2014 EBITDA estimate of $1.193 billion, in line with the data center group at ~13x, which we believe is justified as the leader in the colocation space despite Equinix’ s 1.5-year time table for REIT conversion. We believe investors will be attracted to this sector, and to Equinix in particular, given its strong revenue growth (20% pro forma in 2012) and our belief that it is a highly investable name with a sizeable market cap.

Frank G. Louthan IV

Analysts’ Best Picks® for 2013 10

Jabil Circuit, Inc. (JBL:NYSE)

12-Month Target Price ...... $24.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $20.38 Hist. 12-month Price Range ...... $23.95 - $16.39 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.32 / 1.6% Market Capitalization (mil.) ...... $4,231 FY (Aug) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 207.6 EPS $1.95 $1.86 $2.35 Book Value (05/13) ...... $10.63 P/E 10.5x 11.0x 8.7x ROE (TTM) ...... 16% Revenue (mil.) $17,152 $18,094 $19,841 Net Debt (mil) ...... $1,019/35% Non-GAAP EPS excludes extraordinary items and one-time events. Core EPS excludes options, amortization, and restructuring. A leading electronic manufacturing services (EMS) company headquartered in St. Petersburg, Florida, Jabil Circuit has operations around the world and serves a variety of end-markets, including consumer, industrial/instrumentation/medical, networking, computing/storage, telecom, and automotive. FY12 revenue was $17.2 billion.

EMS Ready for Some Gentrification With Jabil the Best House on the Block

1H13 sees tough headwinds. EMS continued its schooling in hard knocks in 1H13 as the world economic engine sputtered along the slow road to recovery. Starts and stops in economic progress generate a sense of insecurity, and most businesses remain cautious, avoiding increased investment and/or unproven projects. This has resulted in major headwinds for EMS, including: 1) shrinking IT budgets limiting end-market demand, which reduces volume in the base businesses and delays new program wins; 2) acceleration in commoditization of hardware, which in turn produces pricing pressure on the back- end of the supply chain, squeezing margins; and 3) less outsourcing from non-IT industries as risk-averse management teams stay complacent with the status quo.

Stocks starting to reflect improved outlook; Jabil lags group despite better prognosis. Despite the disappointing results, EMS stocks have rallied this year, climbing 18% on average vs. the S&P 500 of +15%. Surprisingly, Jabil has lagged the group (up just 6%) despite clocking in the best internal revenue growth and above-average EPS growth and ROIC. The group’s rally is a clear sign that investors are betting on better times in F2H13/CY14 as the economy improves, depressed IT budgets reignite, delayed programs start to launch, outsourcing picks up again, and margins expand as companies leverage their lean cost structures. We see Jabil poised to capitalize on these trends as much as any other EMS company, and we expect to see revenue growth again in Industrial & Clean Technology and Healthcare & Instrumentation, as well as reacceleration in Enterprise & Infrastructure (E&I). The former should help drive Diversified Manufacturing Services (DMS) margin more toward the midpoint of the long-term target range (5.5-7.0%), while E&I margins are expected to improve substantially as soon as next quarter, as the segment undergoes significant structural improvements. Finally, the company should also benefit from restructuring initiatives that are expected to generate savings of $30-40 million in FY14 ($0.11-0.15 per share) and an incremental $65 million in FY15 (~$0.25 EPS contribution).

Jabil has structural advantages. Beyond this cyclical recovery, Jabil has several unique opportunities that should enable it to achieve above-average revenue and earnings growth vis-à-vis peers. Specifically, the Specialized Services segment within DMS offers advanced material technologies in plastics and metals that are used to create highly differentiated products for customers, and the company has done a terrific job of leveraging this technology, gaining share at its largest customer, Apple [(AAPL/$415.05/Strong Buy), 13% of FY13 revenue]. With Nypro, Jabil acquired more advanced capabilities in materials manufacturing, specifically in plastics, while gaining an immediate foothold in the attractive consumer packaging and healthcare (disposables) end markets.

Valuation remains compelling, with the stock trading at just 8.2x our CY14 non-GAAP EPS estimate of $2.48 and 3.9x on an EV/EBITDA basis (vs. EMS peer averages of 11.7x and 5x). Our price target of $24.00 is based on ~10x CY14E non-GAAP EPS, below the EMS peer average. Brian G. Alexander, CFA

Analysts’ Best Picks® for 2013 11

Nuance Communications, Inc. (NUAN:NASDAQ)

12-Month Target Price ...... NM Rating ...... Market Perform Current Price (07/08/2013) ...... $19.05 Hist. 12-month Price Range ...... $25.89 - $18.00 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.00 / 0.0% Market Capitalization (mil.) ...... $6,220 FY (Sep) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 326.5 EPS $1.73 $1.37 $1.47 Book Value (03/13) ...... $8.54 P/E 11.0x 13.9x 13.0x ROE (TTM) ...... 13% Revenue (mil.) $1,738 $1,995 $2,119 LT Debt (mil) ...... $2,337/46% Non-GAAP EPS excludes one-time items. Nuance Communications, Inc., headquartered in Burlington, Massachusetts, is the leading supplier of speech recognition, dictation, and digital imaging software used to automate a wide range of manual processes.

Transition to Cloud Leads to Difficult 1H13 for Nuance; Health Care Remains Bright Spot

Nuance Communications remains a leader in speech recognition and natural language understanding (NLU) technology. We view Nuance’s core technologies to be strategically valuable across a number of end markets, and this may be the reason that the company has attracted the interest of noted activist investor Carl Icahn. Icahn has been steadily building a position in Nuance through stock and proprietary option purchases over recent months. Currently, Nuance’s business model is undergoing a transition from perpetual license to recurring revenue across many of its operating segments, and this has caused growth to slow and margins to compress.

In the most recent quarter, revenue in the Health Care segment (47% of revenue) was roughly in line with expectations; however, margins suffered due to increasing cloud/recurring revenue mix. Meanwhile, both the Enterprise and Mobile segments were below expectations due to the weaker macro economy and the transition towards cloud/recurring revenues.

Management guided for June revenues to be slightly up sequentially, with flattish EPS, below normal seasonality as many of the structural issues in the company’s end markets will likely continue. The company has made significant management changes as a result of recent performance and will likely be less acquisitive going forward. Instead, Nuance announced a $500 million share repurchase program, perhaps in reaction to Icahn’s investment.

With growth slowing as a result of the cloud transition, execution will dominate investor attention. The wild card in the near term remains Icahn, who may become much more active now that he has built a significant position (which we estimate to be 15% through stock and options) and may provide a catalyst for the stock to go higher.

Tavis C. McCourt, CFA

Analysts’ Best Picks® for 2013 12

Protective Life Corporation (PL:NYSE)

12-Month Target Price ...... $46.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $40.05 Hist. 12-month Price Range ...... $40.32 - $24.67 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.80 / 2.0% Market Capitalization (mil.) ...... $3,140 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 78.4 EPS $3.75 $3.98 $4.70 Book Value (03/13) ...... $57.89 P/E 10.7x 10.1x 8.5x ROE (TTM) ...... 6% Revenue (mil.) $3,689 $3,714 $3,849 LT Debt (mil) ...... $1,931/40% Non-GAAP EPS reflects GAAP EPS less realized gains & losses on investments, non-operating benefits & charges, and discontinued operations. Revenues do not include MONY. Protective Life Corporation, based in Birmingham, Alabama, is a diversified life insurance and annuity provider founded in 1907. The company's principal subsidiaries, Protective Life Insurance Company, West Coast Life Insurance Company, Empire General Life Assurance Corporation, Protective Life and Annuity Insurance Company, and Lyndon Property Insurance Company, operate under business segments including: Life Marketing, Annuities, Acquisitions, Stable Value, and Asset Protection. The company operates in all 50 states, utilizing a variety of distribution channels, and has approximately 2,500 employees.

Full Underlying Value Remains Untapped

Reflecting current valuation levels, we continue to believe that Protective Life Corporation has the potential for substantial share price appreciation. Protective Life is an important player in the life insurance space and has historically demonstrated excellent underwriting and acquisition capabilities.

In April of this year, Protective announced the acquisition of MONY Life Insurance Company ("MONY") and an agreement to reinsure the in-force book of life insurance policies written by MONY's subsidiary, MONY Life Insurance Company of America (“MLOA”) - primarily prior to 2004 - from The AXA Group for roughly $1.1 billion. We believe the deal to be very attractive for Protective Life and expect earnings growth in the low double-digit range over the next few years as GAAP profits emerge from older vintage products, annuity balances continue to build, and the low-risk transaction begins to add value.

The risk-based capital (RBC) ratio at the end of March was approximately 515-520% (an increase sequentially and annually), already exceeding the company’s year-end RBC of 500-510%, but is expected to fall to 400% at the end of 2013, reflecting the MONY deal and an assumption of suspended share repurchases. Going forward, the capital ratio is expected to climb to 450% in 2014 before being fully back in the acquisition game in 2015 at 500%.

While we believe the company is well positioned with regard to the low interest rate environment given its tight cash flow matching, we expect Protective to benefit, along with most stocks in this sector, from the steadily increasing 10-year Treasury, up to 2.70% from 1.58% on December 6, 2012, when the original 2013 Analysts’ Best Picks® list was priced. Life insurance sales climbed in both 4Q12 and 1Q13 as competitors matched Protective’s earlier interest-rate-induced price increases. Meanwhile, steadily improving equity markets have benefited variable annuity earnings.

Our target price of $46.00 assumes that PL shares can sell at a P/E multiple of ~9.8x our 2013 non-GAAP operating EPS estimate of $4.70. This multiple is a 30% discount to the current S&P 500 multiple of 14.1x (according to Thomson Reuters). Our relative P/E multiple, in this case 70%, is based on the average historical relative multiple for PL shares during the period January 1, 2003, through June 30, 2007, a time frame during which we believe valuation tendencies were normalized.

Steven D. Schwartz, CFA

Analysts’ Best Picks® for 2013 13

Tractor Supply Co. (TSCO:NASDAQ)

12-Month Target Price ...... $123.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $119.14 Hist. 12-month Price Range ...... $120.50 - $75.46 Suitability ...... Aggressive Growth Dividend/Yield ...... $1.04 / 0.9% Market Capitalization (mil.) ...... $8,435 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 70.8 EPS $3.80 $4.45 $5.13 Book Value (03/13) ...... $14.55 P/E 31.4x 26.8x 23.2x ROE (TTM) ...... 27% Revenue (mil.) $4,664 $5,157 $5,744 LT Debt (mil) ...... $1/0%

Tractor Supply Co., based in Brentwood, Tennessee, is the largest operator of retail farm and ranch stores in the United States. The company operates retail stores under the names Tractor Supply Company and Del’s Farm Supply and operates a website under the name TractorSupply.com. Stores are typically located in towns outlying major metropolitan markets and in rural communities. Tractor Supply stores typically range in size from 15,500 square feet to 18,500 square feet of inside selling space and additional outside selling space. As of December 31, 2012, the company owned and operated 1,176 locations.

Continuing to Gain Appreciation for Rapid, Fundamental Growth

Up nearly 35% through the first half of 2013, TSCO shares have outperformed our hardline retail coverage universe (excluding consumer electronics retailers) as well as the broader market indices as investors are gaining confidence in Tractor Supply’s unique, long-term growth story. We remain optimistic in the continuation of this performance over the balance of the year as the long-term investment themes underlying our bullish view should remain intact. These themes include the following:

Fastest unit growth in hardline retail. We estimate Tractor Supply will grow its selling space 8% in 2013 - the fastest rate in hardline retail - to over 1,275 stores. Importantly, we foresee this high level of growth extending for at least the next four years as the company targets a long-run profile of 2,100 stores by filling out its existing East Coast and Midwest markets, as well as newer markets in the Rockies and West Coast.

Robust comp sales growth. Same-store sales growth for Tractor Supply has ranged 5-8% during the past three years. The company has successfully navigated challenges such as extreme drought conditions in some markets, with other regions plagued by cool/wet weather. Tractor Supply has revamped its merchandise assortment and created a flexible supply chain strategy that has turned weather challenges into sales opportunities. Further, same-store sales benefit from Tractor’s young store base (~24% of its selling space is less than four years of age) as new locations deliver the fastest rate of y/y growth.

Expanding operating margin. Operating margin has steadily improved from 6.0% in 2009 to 9.4% at the end of 2012. We estimate that EBIT % for Tractor can reach 10.0% over the next three years and 10.5% within five years as the company continues to deliver on initiatives to improve its gross margin rate, as well as leverage operating expenses with its robust same-store sales growth.

Rising return of capital. An investment in TSCO continues to offer investors a rare combination of high growth and rising return of capital. Earlier this year, Tractor Supply raised its quarterly cash dividend 30% from $0.20 to $0.26 (or $0.80 to $1.04 on an annualized basis), the third consecutive increase since initiating its dividend in March 2010 at $0.28 per annum. Further, Tractor Supply continues to increase its rate of share repurchases, having bought back ~4% of its stock (or $317 million) over the last four quarters. Importantly, over the next four years we anticipate the company to continue increasing its returns to shareholders at similarly healthy levels (an annual pace of 2-3% share buybacks and 15-20% dividend increases).

Our target price of $123.00 assumes that TSCO shares will trade at 27.6x our 2013 EPS estimate of $4.45. This valuation comes at a ~15% premium to the ~24x average multiple commanded by shares over the past two years. We believe such a premium is warranted in light of Tractor Supply’s potential for above-average growth and to increase its returns to shareholders via dividends and buybacks. Dan Wewer, CFA

Analysts’ Best Picks® for 2013 14

Trinity Industries, Inc. (TRN:NYSE)

12-Month Target Price ...... $47.00 Rating ...... Outperform Current Price (07/08/2013) ...... $35.76 Hist. 12-month Price Range ...... $45.67 - $21.53 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.52 / 1.5% Market Capitalization (mil.) ...... $2,922 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 81.7 EPS $3.19 $4.00 $4.50 Book Value (3/13) ...... NM P/E 11.2x 8.9x 7.9x ROE (TTM) ...... 14% Revenue (mil.) $3,875 $4,138 $4,220 Net Debt (mil) ...... $2,975/58% Non-GAAP EPS excludes one-time items; ROE is our projection for 2013 return on average equity. Trinity Industries, Inc., headquartered in Dallas, Texas, is a diversified manufacturing company with a focus on transportation equipment and related services. The company's primary products include railcars, inland barges, concrete & aggregates, highway & related products, and structural wind towers. Trinity is the largest freight railcar manufacturer in North America.

Attractive Railcar Supplier Despite Near-Term Concerns of Potential Overbuild

Solid visibility through 2015. Trinity Industries remains one of our favorite stock picks in the railcar supply space. The company has a strong railcar backlog of 41,265 at the end of 1Q13 for production into 2015/2016, providing good visibility into its core rail business. The newly formed railcar leasing joint venture and capitalization of TRIP Rail Holdings allows for greater upside to the leasing business than was previously assumed under the old structure (depending on how quickly the new entity ramps up purchases). Trinity is also a primary beneficiary of the crude transportation boom through several of its other businesses, including tank head production in its energy equipment business, inland tank barge demand, and of course tank railcar demand through both its rail group and its leasing group. The continued build-up of its leasing fleet provides some downside protection in the event the railcar cycle rolls over quicker than expected. While the industry has seen a significant amount of tank car orders already (and frankly not much else), we believe the tank cycle has long legs, as the more conventional tank cars for service in industries such as chemicals have been under-represented of late and will require significant replacement in the coming years. Therefore, even when we see an overbuild of tank cars for crude-by- rail service, we do not think that the end is near for railcar manufacturers as we also expect covered hopper demand to return in force soon given material replacement demand needs.

Fundamentals remain healthy. Trinity’s overall fundamentals are healthy, with a solid backlog for inland barges and a growing railcar backlog, while wind tower backlog remains on the decline. Trinity’s rail group had 57.5% of the industry backlog as of 1Q13, a significant improvement off the cycle lows but still not at 1Q03’s high of 65.6%. The company is securing orders (60.7% share of industry orders in 1Q13, 40.5% in 2012) for higher margin cars, as the average price per railcar in the backlog has increased for six straight quarters, in turn boosting operating profits for the rail group from (3.5)% in 2009 to 16.5% in 1Q13. We expect margin improvement as the company delivers these higher-margin railcars to drive industry-leading earnings growth in 2013.

Under-valued after stock gives back most of its gains from earlier in the year. Our price target of $47.00 per share is based on a combination of 12.5x our 2014 EPS estimate of $4.50 and 6.0x our 2014 EBITDAR estimate, both discounts to the five-year average multiples of 15.2x and 7.0x, respectively. The discounted multiple assumptions reflect the potential risks of this railcar market rolling over faster than expected while still accounting for Trinity’s potential earnings power through this cycle. Arthur W. Hatfield, CFA

Analysts’ Best Picks® for 2013 15

Zions Bancorporation (ZION:NASDAQ)

12-Month Target Price ...... $36.00 Rating ...... Strong Buy Current Price (07/08/2013) ...... $31.16 Hist. 12-month Price Range ...... $31.40 - $17.58 Suitability ...... Aggressive Growth Dividend/Yield ...... $0.16 / 0.5% Market Capitalization (mil.) ...... $5,740 FY (Dec) 2012A 2013E 2014E Shares Outstanding (mil.) ...... 184.2 EPS $1.77 $1.83 $2.07 Book Value (03/13) ...... $27.43 P/E 17.6x 17.0x 15.1x ROE (TTM) ...... 7.1% Revenue (mil.) $2,298 $2,220 $2,267 Debt (mil) ...... NM/NM Non-GAAP EPS excludes non-recurring items, subordinated debt-related charges, and accretion on acquired loans. Zions Bancorporation is a financial holding company based in Salt Lake City, Utah. The company has total assets of approximately $55.5 billion and operates independently-branded commercial banks through more than 500 offices in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, and Washington. Zions’ position as a conglomerate of eight community banks from Seattle to Houston gives it a localized feel within each community with the ability to coordinate operations and efficiencies like a national bank. Zions is also a national leader in Small Business Administration (SBA) lending and public finance advisory services.

Strong Expected Earnings Growth Driving Stock Appreciation

We expect the positive momentum that Zions has recently built will carry forward through the second half of 2013. Despite its ~40% increase YTD, we believe the stock is still undervalued due to several key fundamental trends, as well as strong positioning for rising rates.

Over the remainder of 2013, we believe Zions is particularly well positioned based on the improving conditions throughout its attractive western U.S. footprint, where real estate values have continued to stabilize. Moreover, we expect loan growth to accelerate over the next several quarters as the improvement in the economy allows more businesses to reinvest.

More credit leverage than peers. Zions is better positioned than most peers to benefit from the ongoing release of loan loss reserves from low or negative provisioning over the next one to two years. We highlight that reserves still cover 2.26% of total loans and 84% of nonperforming loans versus peer medians of 1.66% and 73%, respectively. We project reserve releases to reduce the reserve ratio to 1.68% by 4Q14, which equates to the addition of ~$0.84 (+3.4%) to tangible book value per share.

Loan growth is showing signs of strengthening. Based on the timing of the recession and the markets that bore the brunt of the real estate downturn, Zions lagged some of its peers in returning to an offensive posture. Moreover, the recovery for its targeted small business clients is just now catching up to the recovery for larger corporations, which, when combined with underappreciated strengthening fundamental commercial and industrial (C&I) trends and the improving economic backdrop in its western U.S. footprint, fuels our expectations for solid growth in the back half of the year.

Simplifying capital structure. We believe Zions will have the opportunity to continue reducing its overall funding costs and diminish a significant overhang for investors by simplifying its capital structure over the next one to two years.

Highly-levered to rising interest rates. Zions has a significantly asset-sensitive balance sheet, positioning it well relative to peers when short-term interest rates begin to rise. Additionally, its relatively small investment securities portfolio has allowed it to avoid the losses being incurred on many bank bond portfolios.

Shares are attractively valued. ZION shares currently trade at 16.4x our forward four-quarter EPS estimate of $1.90 and 1.44x tangible book value (TBV), which compares to its regional bank peer averages of 13.9x and 1.56x, respectively. Our 12-month price target of $36.00 is based on ZION trading at ~17x our 2014 EPS estimate. We believe Zions deserves a premium P/E multiple compared to peers given our outlook for better-than-peer EPS growth, which is driven by additional refinancings, credit leverage, and a highly asset-sensitive balance sheet. David J. Long, CFA

Analysts’ Best Picks® for 2013 16

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The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.

Ratings and Definitions Raymond James & Associates (U.S.) definitions Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months.

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Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Ltd. (Canada) definitions Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold.

Raymond James Latin American rating definitions Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Euro Equities, SAS rating definitions Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon.

In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.

Rating Distributions Coverage Universe Rating Distribution Investment Banking Distribution RJA RJL RJ LatAm RJEE RJA RJL RJ LatAm RJEE Strong Buy and Outperform (Buy) 52% 65% 31% 23% 32% 0% 0% 0% Market Perform (Hold) 42% 34% 66% 9% 24% 0% 0% 0% Underperform (Sell) 6% 1% 3% 2% 0% 0% 0% 0%

Suitability Categories (SR) Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal. Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, at least a small dividend, and the potential for long-term price appreciation. Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings and acceptable, but possibly more leveraged balance sheets. High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and risk of principal. Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, and a substantial risk of principal.

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Raymond James Relationship Disclosures Raymond James expects to receive or intends to seek compensation for investment banking services from the subject companies in the next three months.

Company Name Disclosure Altera Corporation Raymond James & Associates makes a market in shares of ALTR. AmerisourceBergen Corp. Raymond James & Associates makes a market in shares of ABC. Apple Inc. Raymond James & Associates makes a market in shares of AAPL. Bed Bath & Beyond Raymond James & Associates makes a market in shares of BBBY. Ctrip.com International, Raymond James & Associates makes a market in shares of CTRP. Ltd. Equinix Raymond James & Associates makes a market in shares of EQIX. Jabil Circuit, Inc. Raymond James & Associates makes a market in shares of JBL. McKesson Corporation Raymond James & Associates received non-investment banking securities-related compensation from MCK within the past 12 months. Nuance Communications, Raymond James & Associates co-managed an offering of debt for Nuance Communications, Inc. within the Inc. past 12 months. Raymond James & Associates makes a market in shares of NUAN. Raymond James & Associates received non-investment banking securities-related compensation from NUAN within the past 12 months. Protective Life Raymond James & Associates co-managed an offering of debt for Protective Life Corporation within the Corporation past 12 months. Raymond James & Associates makes a market in shares of PL. Raymond James & Associates received non-securities-related compensation from PL within the past 12 months. Tractor Supply Co. Raymond James & Associates makes a market in shares of TSCO. Raymond James & Associates received non-investment banking securities-related compensation from TSCO within the past 12 months. Trinity Industries, Inc. Raymond James & Associates makes a market in shares of TRN. Walgreen Co. Raymond James & Associates received non-investment banking securities-related compensation from WAG within the past 12 months. Xilinx, Inc. Raymond James & Associates makes a market in shares of XLNX. Zions Bancorporation Raymond James & Associates makes a market in shares of ZION.

General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. International investments involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available at rjcapitalmarkets.com/Disclosures/index. Copies of research or Raymond James’ summary policies relating to research analyst independence can be obtained by contacting any Raymond James & Associates or Raymond James Financial Services office (please see raymondjames.com for office locations) or by calling 727-567-1000, toll free 800-237-5643 or sending a written request to the Equity Research Library, Raymond James & Associates, Inc., Tower 3, 6th Floor, 880 Carillon Parkway, St. Petersburg, FL 33716.

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U.S. Equity Research (800) 248-8863

Management Financial Services Real Estate Robert P. Anastasi, CFA Daniel E. Cardenas (312) 655-2986 Paul D. Puryear (727) 567-2253 (727) 567-2286 Banking Director of Real Estate Research Senior Managing Director, Robert J. Dodd, Ph.D. (901) 579-4560 William A. Crow (727) 567-2594 Director of Equity Research Specialty Finance Lodging/REITs Shawn Borgeson (727) 567-2571 David J. Long, CFA (312) 612-7685 Buck Horne, CFA (727) 567-2561 Managing Director, Banking Housing/REITs Product Development Patrick J. O'Shaughnessy, CFA RJ Milligan (727) 567-2660 David A. Henwood, CFA (312) 612-7687 REITs (727) 567-2505 Capital Markets Collin Mings, CFA (727) 567-2585 Managing Director, C. Gregory Peters (312) 612-7717 REITs Chief Investment Officer Insurance/Insurance Brokerage & Services Mercedes S. van Woerkom Anthony J. Polini (212) 856-4897 Technology & Communications (727) 567-2601 Banking Brian G. Alexander, CFA Managing Director, Michael Rose (727) 567-2643 (727) 567-2312 Research Associate Manager Banking Director of Technology Research Steven D. Schwartz, CFA (312) 612-7686 Ric Prentiss (727) 567-2567

Consumer Insurance Director of Telecommunications William J. Wallace IV (301) 657-1548 Services Research Budd Bugatch, CFA (727) 567-2527 Banking Brian Gesuale (727) 567-2287 Director of Furnishings Research Donald A. Worthington (415) 538-5733 IT Services & Security Sam Darkatsh (727) 567-2537 Banking Wayne Johnson (404) 442-5837 Home & Building Products Transaction Processing Bryan C. Elliott, CFA (404) 442-5856 Healthcare Aaron Kessler, CFA (415) 616-8959 Restaurants John W. Ransom (727) 567-2593 Internet Joseph D. Hovorka (404) 442-5863 Director of Healthcare Research Simon M. Leopold (212) 856-5464 Entertainment & Leisure Michael J. Baker (727) 567-2499 Communications Equipment Dan Wewer, CFA (404) 442-5846 Benefits Management Frank G. Louthan IV (404) 442-5867 Hardline Retailers Jayson Bedford (727) 567-2565 Telecommunications Services Benjamin P. Brownlow (404) 442-5859 Medical Devices Tavis C. McCourt, CFA (615) 665-3644 Hardline Retailers Alexander Y. Draper, CFA (404) 442-5888 Communications Technology Healthcare Information Technology/ Hans C. Mosesmann (727) 567-2498 Energy (800) 945-6275 Pharma Services Semiconductors J. Marshall Adkins Lawrence S. Keusch (617) 897-8992 Chris Quilty (727) 567-2602 Director of Energy Research Hospital Supplies & Equipment Satellite & Space Andrew Coleman Nicholas Jansen (727) 567-2446 J. Steven Smigie (212) 856-4893 Exploration & Production Alternate Site Healthcare Providers/ Analog & Communications John Freeman, CFA Death Care/Diagnostics/Drug Distributors/ Semiconductors Exploration & Production Drug Stores/Hospitals Terry Tillman (404) 442-5825 Collin Gerry Application Software Oilfield Services Industrial Michael Turits, Ph.D. (212) 297-5617 Darren Horowitz Sam Darkatsh (727) 567-2537 Infrastructure Software Exploration & Production/ Specialty Distribution Midstream Suppliers William H. Fisher, CFA (404) 442-5858 Transportation Pavel Molchanov Waste & Industrial Services Patrick Tyler Brown, CFA Alternative Energy & Clean Technology/ (404) 442-5803 Integrated Majors & Refiners Macro Research Transportation Services James M. Rollyson Scott J. Brown, Ph.D. (727) 567-2603 Arthur W. Hatfield, CFA Oilfield Services Chief Economist (901) 579-4868 Kevin Smith Jeffrey D. Saut (727) 567-2644 Transportation Services Exploration & Production/ Chief Investment Strategist James D. Parker, Ph.D. Midstream Suppliers (404) 442-5857 Cory J. Garcia Mining & Natural Resources Airlines Integrated Majors & Refiners/ James M. Rollyson (713) 278-5254 Savanthi Syth, CFA (727) 567-5274 Midstream Suppliers Coal Airlines

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