THE DAY AHEAD

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North American Edition

REUTERS POLL 351,000 -3.060 mln -PRIOR 352,000 361,250 3.068 mln -5 SOURCE Labor Department

For Thursday, April 25, 2013

MARKET RECAP
Stocks see-sawed on Wednesday on mixed corporate earnings, while Treasuries rose. The dollar fell against the euro. Oil jumped after data showed a decline in oil inventories, and gold edged higher on physical buying.

COMING UP
Exxon Mobil, the world's largest publicly traded oil company and
smaller U.S. rival ConocoPhillips report first-quarter results that likely benefited from a rebound in North American and European natural gas prices.

When Amazon reports first-quarter results, Wall Street will be lookSTOCKS DJIA Nasdaq S&P 500 Toronto Russell FTSE Eurofirst Nikkei Hang Seng Close 14675.91 3269.65 1578.77 12270.43 934.02 6431.76 1191.82 13843.46 22183.05 Yield 1.6978 0.2308 0.6887 2.8877 Change -43.55 0.32 -0.01 179.49 4.66 25.64 8.79 313.81 376.44 % Chng -0.30 0.01 0.00 1.48 0.50 0.40 0.74 2.32 1.73 Yr-high 14887.50 3306.95 1597.35 12904.71 954.00 6533.99 1209.05 13611.58 23944.74 Yr-low 12035.10 2726.68 1266.74 11209.55 729.75 5897.81 1132.73 10398.61 21423.25

ing for signs that a recent deceleration in unit growth is not a longterm trend. Analysts and investors also hope that recent profitability gains, from lower shipping and fulfillment costs and the growth of higher-margin businesses, will continue. Separately, Amazon and six publishers will argue before U.S. District Judge Jed Rakoff in Manhattan to dismiss an antitrust class-action lawsuit accusing them of blocking independent bookstores from selling e-books that can be read on Amazons Kindle. For a related Reuters Insider video, click here

Bristol-Myers Squibb, hurt by cheaper generic forms of its Plavix

blood clot preventer and Avapro blood pressure medicine, is expected to report sharply lower first-quarter sales and earnings. Investors will want reassurance on Thursday that newer drugs for melanoma, diabetes and rheumatoid arthritis will continue to grow sharply and that the company's next generation of drugs is faring well in clinical trials.

TREASURIES 10-year 2-year 5-year 30-year COMMODITIES June crude $ Spot gold (NY/oz) $

Price FOREX 3 /32 Euro/Dollar -8 /32 Dollar/Yen 1 /32 Sterling/Dollar 9 /32 Dollar/CAD Price 91.57 1429.96 3.1580 283.41 Price 5.77 6.54 6.01 45.11 64.60 15.69 56.02 104.93

Last % Chng 1.3014 99.58 1.5263 1.0254 0.12 0.12 0.17 -0.02

Wall Street is betting that gift card redemptions boosted quarterly

results at Starbucks, which also is expected to have weathered the payroll tax hike-related spending dip better than most retail and restaurant chains.

$ change 2.39 17.72 0.0640 1.91 $ change 0.78 0.87 0.65 4.77 -18.21 -1.67 -5.73 -7.83

% change 2.68 1.25 2.07 0.68 % change 15.63 15.34 12.13 11.82 -21.99 -9.62 -9.28 -6.94

Copper U.S. (front month/lb) $ Reuters/Jefferies CRB Index

Southwest Airlines is expected to report improved first-quarter

results aided by higher revenue from new fees this year, while JetBlue is likely to post flat profit on higher revenue. United Continental, currently the worlds largest carrier, also posts results. Investors will be looking to see if U.S. budget cuts will affect airlines going into the summer travel season.

BIG MOVERS
Federal-Mogul JinkoSolar Holding Supervalu First Solar Edwards Lifesciences Juniper Networks Motorola Solutions Amgen

The Labor Department releases weekly Jobless Claims data. According to IFR, initial unemployment insurance claims should see an uptick to about 360,000 from 352,000 the week before.

The Financial Stability Oversight Council holds meetings in

Washington. The main event for the super group of U.S. regulators will be its voting to approve its annual report. Last year, the report talked about stress in the euro area, gave an update on where things stood with financial regulation and talked about potential threats, such as cybersecurity, and banks reliance on short-term wholesale funding.

For The Day Ahead - Canada, click here

THE DAY AHEAD

For April 25, 2013

COMING UP (continued)
Herbalife, the nutritional products company at the heart of a
public battle between hedge fund titans Bill Ackman and Carl Icahn, hosts its annual shareholders meeting, where Icahn's two board nominees will stand for election to the company's board.

Analysts expect Time Warner Cable, the second-largest U.S.

cable provider, to lose video subscribers in the first quarter, but expect the company to report higher earnings and revenue. Listen for any indications that CEO Glenn Britt will leave by the end of the year, which has been rumored.

United Parcel Service is expected to post strong results as it

sees orders slowly rise. UPS, the second biggest courier company after FedEx, is coming off a particularly difficult year, when customers cut back on air courier services.

Dow Chemical is expected to post a slight rise in quarterly

profit, helped by sales of plastics and chemicals. Over the past few years, the biggest U.S. chemical maker has changed its focus from low-margin commodity chemicals to high-margin specialty materials and in March Dow said it plans to raise $1.5 billion from asset sales over the next 18 months to focus on high-margin businesses.

Diversified U.S. manufacturer 3M Co is expected to report a

slight jump in quarterly profit due to higher sales in its security and traffic-safety units.

Some Wall Street analysts are skeptical that Safeway's fortunes are turning, saying optimism surrounding the company's planned IPO of its Blackhawk gift card division masks underlying weakness in the second-largest U.S. grocery chain's sales. The company, which reports quarterly results, is still on the hunt for a CEO and is exploring putting its Canadian real estate assets into a REIT.

Occidental Petroleum Corp will report quarterly results after

it sought to knock down speculation about a battle between its former CEO and chairman and the current boss, Stephen Chazen, as the fourth-largest U.S. oil company seeks his successor.

The quarterly report from Colgate will show how much pressure it felt from the devaluation of the Venezuelan bolivar. Venezuela accounts for about 5 percent of Colgate's total sales, and the company previously said that it would incur a loss related to the devaluation of the Venezuelan currency. The company is also working on a restructuring announced last year that should lead it to trim 6 percent of its workforce by the end of 2016.

Hershey, the U.S. candy maker, reports quarterly earnings.

The maker of Reese's peanut butter cups and Twizzlers often performs better than other food companies because purchases of its products are often impulsive.

Fiat and a United Auto Workers union retiree benefit fund

square off in a Delaware court over the price the Italian carmaker has to pay to buy an additional stake in Chrysler, over which it wants full control.

When motorcycle maker Harley-Davidson reports its firstquarter earnings, the focus will again be on U.S. sales as investors look for signs the broader U.S. rebound is strengthening or weakening. But anything Harley says about Japan will also be closely watched because it is the company's largest single overseas market and one where the weak Japanese currency could create headaches for U.S. and European luxury goods makers.

Biotechnology company Biogen Idec, which just won approval

of the highly anticipated multiple sclerosis drug Tecfidera, which is seen as its most important growth driver, is expected to report higher first-quarter profit and revenue. But investor focus will be on launch plans and any sales forecasts the company may provide for the new medicine.

Clearwire may provide an update in its quarterly earnings call

as to whether it will draw down on $80 million financing available to it from majority owner Sprint Nextel, which is hoping to buy the rest of the company. They may also update shareholders on the date for a special meeting to vote on Sprint's offer. But the outcome of the proposed deal has been complicated by shareholder complaints about the deal value, Dish's counter offer to buy Clearwire followed by Dish's subsequent offer to buy Sprint, which may scupper Dish's higher bid for Clearwire.

Canada's second-largest oil producer and refiner Imperial Oil

reports quarterly earnings. The market will be watching for company updates on the delayed start-up of the 110,000 barrels-per-day Kearl oil sands mine. Originally expected to open by the start of 2013, the site has not yet begun full operations.

When New York Times reports quarterly results, CEO Mark

Thompson is expected to reveal more about the companys strategy since he took the helm last November. Top of mind will be its digital pay model and how much time it has before subscriptions start to plateau.

Also look for quarterly results from companies including Raytheon, Bunge, Aflac, PerkinElmer, Celgene, Coinstar, and Chubb.

THE DAY AHEAD

For April 25, 2013

MARKET MONITOR
Stocks ended mostly flat on Wednesday as Boeing scaled a five -year high, but weakness in Procter & Gamble kept the Dow in negative territory. Shares of Amgen dropped 6.94 percent, while Boeing jumped 3.06 percent to give the biggest support to the Dow. Procter & Gamble fell 5.88 percent. The Dow was down 0.30 percent, the S&P 500 Index was flat and the Nasdaq was up 0.01 percent. Treasury prices edged up as unexpectedly weak data on durable goods orders supported safe-haven demand for bonds and after solid demand for an auction of five-year notes. The Treasury Department sold $35 billion in new five-year notes in the afternoon. Indirect bidders took a higher-than-average 43.6 percent of the auction. "Poor economic data could lead to some enhanced action from central banks, which has been bullish for stocks and other risk assets" and limit a further decline in Treasury yields, said Mike Lorizio, head of Treasuries trading at Manulife Asset Management. Benchmark 10-year Treasury notes were up 3/32 to yield 1.70 percent. The 30-year bond was up 10/32 to yield 2.89 percent. The euro rallied against the dollar, reversing a drop to a near three-week low earlier in the day, as optimism that Italy can resolve its political gridlock offset weak German data. The euro dropped to $1.2954, its lowest since April 5, before recovering to trade at $1.3014, up 0.12 percent. The dollar last traded at 99.58 yen, up 0.12 percent on the day. Many traders are braced for a test of the 100-yen mark in coming days, although offers were reported around 99.80-85 yen that could limit the dollar's gains in the short term. The euro last traded at 129.59 yen, up 0.25 percent. Oil prices rose, led by gains in U.S. crude on a surprisingly big drop in weekly gasoline stockpiles and speculation that the glut of crude at the Cushing, Oklahoma hub could soon ease. June crude futures gained 2.68 percent to $91.57 a barrel. The drawdown on gasoline stocks reflects a slight decrease in refinery utilization from last week, and fuel prices that were slightly lower than last week and more than 30 cents lower per gallon than a year earlier, according to a daily survey by the American Automobile Association. Gold prices rose along with crude oil, with physical buyers scooping up the precious metal after a sell-off sent bullion to a two-year low. "There has been quite a lot of support coming from the physical demand, which has been extremely strong since the sell-off and I think that will continue in coming sessions, putting a floor to prices around $1,400," said Peter Fertig, consultant at Quantative Commodity Reaserch. Spot gold rose 1.21 percent to $1,429.34 an ounce. June gold futures were up 1.46 percent to $1,429.40 an ounce. Click on the chart for full-size image

THE DAY AHEAD

For April 25, 2013

TOP NEWS
Boeing profit beats estimates despite 787 problems Boeing's first-quarter earnings jumped nearly 20 percent, handily beating analysts' estimates and showing little impact from the 787 Dreamliner problems. Boeing, in its quarterly report, stood by its sales, earnings and cash forecasts for the full year. Firstquarter net income rose to $1.1 billion, or $1.44 a share, from $923 million, or $1.22 a share, a year earlier. Core earnings, which exclude some pension charges, were $1.73 a share. On that basis, analysts had expected $1.49. Revenue slipped 2.5 percent to $18.9 billion, hit by halted Dreamliner deliveries. Boeing's cash balance fell $2 billion in the latest quarter, less than some analysts had expected. The company said it will start buying back stock in the second quarter under a previously announced plan to spend $1.5 billion to $2 billion on such purchases. P&G forecasts profit below Street, shares drop Procter & Gamble forecast current-quarter profit below Wall Street expectations and year-ago levels. The world's largest household products maker also posted fiscal third-quarter profit that topped estimates despite sales that were weaker than both the company and analysts had anticipated. P&G, forecast fourthquarter core earnings of 69 cents to 77 cents per share, while analysts were looking for 81 cents. P&G said it earned 99 cents per share on a core basis in the quarter ended in March, topping analysts' target of 96 cents. Overall sales rose 2 percent to $20.598 billion while analysts were looking for sales of $20.73 billion. On a net basis, the company earned $2.57 billion, or 88 cents per share, in the fiscal third quarter ended in March, up from $2.41 billion, or 82 cents per share, a year earlier. P&G said it now plans to repurchase $6 billion of its stock this year. For a related graphic, click here Weak durable goods orders point to sluggish U.S. economy Orders for long-lasting U.S. manufactured goods recorded their biggest drop in seven months in March and a gauge of planned business spending rose only modestly, the latest signs of a slowdown in economic activity. Durable goods orders slumped 5.7 percent as demand fell almost across the board, the Commerce Department said. Last month, non-defense capital goods orders excluding aircraft edged up 0.2 percent. Orders for these so-called core capital goods had dropped 4.8 percent in February and economists had expected a 0.4 percent increase last month. Ford profit surpasses estimates as North America shines Ford Motor posted a higher-than-expected first-quarter profit as its North American unit posted its best quarter in more than a decade on the strength of new models. Revenue in North America shot up by one-fifth during the quarter and Ford added that its European restructuring was on track. The automaker reported a pretax profit of $2.1 billion, or 41 cents per share for the quarter, down from about $2.3 billion a year earlier. But the results exceeded the analysts' average estimate of 37 cents per share. Net income was $1.6 billion, or 40 cents per share, up from $1.4 billion a year earlier. Revenue rose to $35.8 billion from $32.4 billion. Click on the chart for full-size image

Lilly's drug, animal health sales disappoint Eli Lilly posted weaker-than-expected quarterly sales of its veterinary drugs and treatments for diabetes and lung cancer as it awaits new promising products in its pipeline. Lilly's medicines for pets and livestock, which typically bolster results, flagged in the first quarter. Sales rose only 2 percent to $499 million, compared with an 18 percent jump in the prior period. Lilly said firstquarter net income rose to $1.55 billion, or $1.42 per share, from $1.01 billion, or 91 cents per share, a year earlier. Excluding special items, Lilly earned $1.14 per share. Analysts on average were expecting $1.05. Revenue was flat at $5.60 billion, coming in below Wall Street expectations of $5.67 billion. Lilly said it still expected earnings to increase this year by as much as 17 percent to between $3.82 and $3.97 per share, compared with a 23 percent drop in 2012. Sprint posts narrower loss, weak subscriber numbers Sprint Nextel posted a smaller-than-expected quarterly loss, but its customer growth suffered as its Nextel network winds down. Sprint added 12,000 customers to its network, compared with the average estimate of almost 198,000 from five analysts contacted by Reuters. Their expectations ranged from 110,000 to 275,000 net additions. Sprint's first-quarter loss narrowed to $643 million, or 21 cents per share, from $863 million, or 29 cents per share, a year earlier. Analysts expected a loss of 33 cents per share. Sprint's revenue rose to $8.79 billion from $8.73 billion. Analysts had expected $8.71 billion. The company now expects 2013 adjusted operating income before depreciation and amortization to reach the high end of its previously announced target of between $5.2 billion and $5.5 billion, excluding costs of closing strategic transactions. Hess profit soars, lifted by higher prices, lower costs Hess Corp, under pressure from investors to improve returns, reported a better-than-expected first-quarter profit, helped by higher oil and natural gas prices and lower costs. First-quarter net income soared to $1.28 billion, or $3.72 per share, from $545 million, or $1.60 per share, a year earlier, boosted by a gain of $588 million, largely from the sale of assets in the UK North Sea and Azerbaijan. Excluding certain special items, Hess earned $1.95 per share. On that basis, analysts' average forecast was $1.59. Revenue soared 39 percent to $4.12 billion.

THE DAY AHEAD

For April 25, 2013

TOP NEWS (continued)

General Dynamics earnings edge higher, beat forecast General Dynamics reported slightly higher first-quarter earnings, far exceeding analysts' forecasts, but revenue fell short of expectations. The company reported net earnings of $571 million, or $1.62 per share, up from $564 million or $1.57 per share, a year earlier. Revenues dipped to $7.4 billion from $7.58 billion. Analysts had forecast earnings of $528 million, or $1.50 per share, on revenue of $7.55 billion. Operating margins edged up to 11.4 percent from 11.3 percent a year earlier, the company said. Chief Executive Phebe Novakovic said the company was focused on operations, cost improvement and cash generation. WellPoint profit rises; some medical costs low WellPoint's first-quarter profit rose after the acquisition of Amerigroup boosted consumer business and medical costs were less than expected in the group that sells plans to small businesses, the U.S. health insurer said. WellPoint raised its 2013 earnings outlook because of the better-than-expected operating results. Revenue rose 16 percent to $17.5 billion. WellPoint reported a profit of $885.2 million, or $2.89 per share, up from $856.5 million, or $2.53 per share, a year earlier. Excluding items such as investment losses, the company earned $2.94 per share. On that basis, analysts were expecting $2.39, up from $2.34 a year earlier. WellPoint forecast 2013 net income of at least $7.75 per share. MetroPCS shareholders approve merger with T-Mobile USA MetroPCS Communications shareholders voted to approve a merger with No. 4 U.S. wireless service provider T-Mobile USA, after T-Mobile parent Deutsche Telekom AG sweetened its terms under pressure from activist shareholders. t was not immediately clear what percentage of shareholders voted in favor
PIC OF THE DAY

People rescue garment workers trapped under rubble at the Rana Plaza building after it collapsed, in Savar, 30 km outside Dhaka, Bangladesh.

of the deal. Separately, General Electric shareholders rejected a proposal to split the roles of chairman and chief executive, jobs currently held by Jeff Immelt, GE said. The proposal from the American Federation of State, County and Municipal Employees pension plan failed at the company's annual shareholder meeting in New Orleans, receiving roughly 25 percent of shares voted. Roughly 77 percent of GE's 10.4 billion shares were voted at the meeting.

ANALYSTS RECOMMENDATIONS
Company Name Apple EBay Edwards Lifesciences Halliburton Lockheed Martin Action JP Morgan cut price target to $545 from $725 after the company gave a weaker revenue outlook for the current quarter. Wells Fargo raised rating to outperform citing positive view of both the eBay marketplaces and PayPal segments, says active user growth has accelerated for ix quarters in a row. Jefferies cut price target to $85 from $114 after the company reported first-quarter results below estimates and lowered its 2013 outlook due to sluggish sales of its transcatheter heart valve. SocGen raised rating to buy from hold citing an attractive point to enter the stock given a 10 percent sell-off from its peak in mid-February. RBC raised price target to $115 from $100 to reflect strong first-quarter results and offered an impressive dividend yield.

THE DAY AHEAD - CANADA

COMING UP
Oil and gas drilling contractor Precision Drilling is scheduled
to report first-quarter results. The company is expected to earn 30 Canadian cents per share on a revenue of C$600.5 million. The company, which operates about a quarter of Canada's onshore drilling rigs, has been affected by a decline in drilling for natural gas.

For April 25, 2013

MARKET MONITOR
Canada's main stock index jumped more than 1 percent on Wednesday, making its sharpest one-day percentage gain in more than 8 months, as higher commodity prices fueled a rise in shares of gold and energy producers. Barrick Gold rose 7.61 percent and Goldcorp was up 6.36 percent. The Toronto Stock Exchange's S&P/TSX composite index was up 1.48 percent at 12,270.43. Shares of Cenovus Energy rose 2.12 percent. The Canadian dollar was down 0.01 percent at $1.0255.

Potash Corp of Saskatchewan will report first-quarter results.

The company is expected to earn 61 cents per share, compared to a profit of 57 cents per share in the year-ago quarter.

The oil producer and refiner Imperial Oil will report firstquarter earnings and hold an annual shareholders meeting. The market will be watching for company updates on the delayed start-up of the 110,000 barrel per day Kearl oil sands mine. The company is expected to earn a profit of C$1.05 per share, compared to a profit of C$1.19 a share in the year-ago quarter.
BIG MOVERS Aquila Resources B2Gold Medivation Canadian Tire Price 0.14 2.60 52.32 92.01 C$ 0.03 0.19 -2.34 -2.94 % Change 22.73 7.88 -4.28 -3.10

TOP NEWS
Barrick Gold reins in costs; could suspend Chile project Barrick Gold, making a painful adjustment to a sustained slump in bullion prices, reported progress in controlling costs and said it is further reducing capital spending. The gold producer also said it may suspend work at Pascua-Lama, its largest project under development, located high in the Andes Mountains. Barrick has so far poured $4.8 billion into Pascua-Lama, which is expected to produce 800,000 to 850,000 ounces of gold a year in its first five years of full production. The company reduced its full-year outlook for all-in sustaining costs to $950-$1,050 an ounce, down from a previous forecast of $1,000 to $1,100. On an adjusted basis, for the first-quarter it earned $923 million, or 92 cents a share, ahead of the average analyst estimate of 88 cents a share. Revenue fell 6 percent to $3.44 billion as gold production dropped about 4 percent to 1.8 million ounces in the quarter. CP Railway profit soars, sees record year-end results Canadian Pacific Railway said an efficiency push coupled with revenue gains helped drive a 53 percent jump in profit and its best first-quarter results since the rail carrier was founded in 1881. Net income rose to C$217 million, or C$1.24 per share, in the quarter ended March 31 from C$142 million, or 82 Canadian cents per share a year earlier. Revenue climbed 9 percent to C$1.5 billion. Analysts expected net profit of C$1.21 per share, on average, on revenue of C$1.49 billion. Operating income jumped 32 percent to C$362 million from C$274 million, while operating costs climbed 3 percent to C$1.13 billion. Cenovus says asset sale delayed by weak markets Independent oil producer Cenovus said that the sale of some of its Saskatchewan oil properties put on the block earlier this year has been delayed by a "down draft" in the country's capital markets. Separately, the company posted a quarterly operating profit that beat analysts' estimates as the cost of raw materials for its two U.S. refineries declined. The company said its oil production rose 15 percent in the quarter to 180,225 barrels a day. Cenovus reported first-quarter operating income, which excludes most one-time items, of C$391 million, or 52 Canadian cents per share. This was ahead of the 48 Canadian cents that analysts had estimated. Net profit fell 60 percent to C$171 million, or 23 Canadian cents per share, due mainly to foreign exchange losses. Cenovus forecast operating cash flow of C$250 million to C$350 million from its refining business in the second quarter, compared with C$344 million a year earlier. Metro profit triples on stake sale, warns of competition Metro more than tripled quarterly earnings after selling part of a convenience store operator, but it warned of a "challenging" competitive environment. Metro's net earnings rose to C$366.8 million, or C$3.77 per share, in the second quarter, from C$96.1 million, or 94 Canadian cents per share, a year earlier. The earnings were helped by an after-tax, one-time gain of C$266.4 million related to the sale of nearly half of its stake in Alimentation Couche-Tard. On an adjusted basis, the company earned C$1.02 per share from continuing operations. Sales fell 3 percent to C$2.51 billion. MEG Energy posts loss as weaker Canadian dollar weighs Oil sands producer MEG Energy reported a first-quarter loss, compared with a profit a year earlier, after a weaker Canadian dollar and lower prices overshadowed higher production. MEG reported a net loss of C$71.3 million, or 32 Canadian cents per share, compared with a profit of C$53.4 million, or 27 Canadian cents per share, a year earlier. The company said the loss was due mainly to unrealized foreign exchange impacts on its U.S. dollar-denominated debt, cash and cash equivalents, as the Canadian currency decreased in value relative to the U.S. dollar.

THE DAY AHEAD

For April 25, 2013

ANALYSIS AND INSIGHT

Sleeping ad giant Amazon finally stirs By Alistair Barr and Jennifer Saba Amazon.com Inc is known in the advertising industry as the "sleeping giant" because the worlds largest Internet retailer harbors a trove of consumer-spending data that many marketers have called an unrealized opportunity. Now it's awakening to the potential. After running ads on its own website for years, the company has taken the first steps toward becoming a true Internet advertising network, using the knowledge garnered from its data to place targeted ads for some of the world's biggest advertisers across thousands of other websites. An Amazon mobile ad network, launched late last year, is now blasting ads via apps on smartphones and tablets, including Apple Inc iPhones and devices powered by Google Inc's Android operating system. For Amazon, an ad business is a new revenue stream with fatter margins than its retail operations. To Google, Facebook and other online ad leaders, Amazon is a threat because it has data they lack. Google knows what people are searching for. Facebook knows what people like and who their friends are. Amazon knows you searched last week for running shoes, but also that you bought a pair a year ago. That kind of information has advertisers salivating. "In todays marketing world, data is gold and Amazon is Fort Knox," said Jeff Lanctot, chief media officer at digital ad agency Razorfish, which counts Mercedes Benz USA, Delta Air Lines and McDonald's among its clients. Lanctot has worked with Amazon for over a decade and says the company's attitude to advertising used to be "take it or leave it." "Now its clearly an area they decided to invest in," he said. "They have made a concerted effort to listen to what advertisers want - the type of data you need, the type of scale you are looking for." ANOTHER $1 BLN BUSINESS? Amazon is getting into hotly contested turf. Google, Yahoo, Microsoft, Facebook and AOL command two-thirds of U.S. online advertising, according to eMarketer. But its consumer data gives it a unique proposition, industry insiders argue. And though the competition will be stiff, it could be worth it. Online advertising has 20 to 30 percent profit margins versus less than 5 percent for Amazons retail business, according to Ben Schachter, an analyst at Macquarie. On Thursday, when Amazon reports results, analysts will be looking for signs of growth in higher-margin businesses, such as advertising and cloud-computing, after years of sacrificing shortterm profit to grow those divisions. Amazon does not disclose ad business results and spokeswoman Kristin Schaefer Mariani declined to comment. But analysts estimate the ad business already generates at least $500 million a year in revenue. David Selinger, a former Amazon executive who runs e-commerce personalization firm RichRelevance, recently predicted that Amazon's ad business will hit $1 billion in sales this year. That's a fraction of Amazon's revenue, expected to be $75 billion this year. But longer term, the ad business could become substantial if it can grab a bigger slice of a digital ad market that will be worth over $50 billion by 2015 in the United States alone, according to eMarketer data. "Could it rival something like Yahoo, Facebook or AOLs ad businesses?" said Macquarie's Schachter. "Sure." ADS ON OTHER WEBSITES Display ads on Amazon's own websites have grown fast since 2011 but what really excites Madison Avenue and Wall Street is Amazon's latest push to create and serve ads on other sites. "The big opportunity is in having a third-party ad network," said Schachter. "There are only a few Amazon sites. Expanding beyond that, they can take advantage of millions of other websites out there." Amazon quietly started serving ads on other websites in the fourth quarter of 2010. This part of its business remained unnamed until about the middle of last year, when the company formally christened it the Amazon Advertising Platform. It currently serves ads on thousands of websites in the United States, Britain and Germany, according to its website. Amazon's Mariani declined to name websites. However, she said Amazon buys ad inventory - or online ad space - from content publishers or through exchanges, which are online markets for buying and selling inventory. The company's in-house technology serves the ads to thirdparty websites in real time. A campaign Amazon ran for Kimberly-Clark's Huggies diapers, and another for video game designer Ubisoft, included ads served off Amazon websites. This is where its advantage lies. It has tracked what millions of shoppers browse, search, and buy on Amazon.com for more than 15 years, using that information to recommend related products to customers. Now, it's using that data to buy ad inventory more efficiently and serve ads to the right consumers, on the right websites, at the right time. A large entertainment company worked with Amazon to promote one of its movies last year, according to a person at the entertainment company. Data on purchases of related DVDs, books and music on Amazon.com helped identify potential customers who were likely to see the movie at the theater and ads were targeted at this audience. Results were above average, based on the number of impressions served and the number of clicks on the ads, the person said. They did not want to be identified as they were not authorized to speak publicly about the company's ad spending. "Amazon spent a lot of time developing algorithms to make recommendations to consumers shopping on Amazon.com," said an executive who oversees an ad exchange that is a partner of Amazon's. "Now they can do this outside of the Amazon world for other companies. Its really an extension of one of their core competencies," said the executive, who declined to be identified because Amazon is an important partner. Armed with consumer information, Amazon can bid more aggressively on exchanges because it is confident that ads created from that inventory will be clicked on more often. The company can also charge advertisers more because its ads are better targeted, according to industry insiders and analysts. "Amazon is not a retailer anymore, it is the largest behavioral marketing company in the world," said Yaakov Kimelfeld, chief research officer at Kantar Media Compete, which helps global brands improve their online marketing. "Amazon will be the best positioned to predict whether to buy inventory or not and be the most efficient in this market." Amazon's purchase data helps advertisers spend more efficiently because they only have to buy access to those consumers most likely to respond to their messages, according to Mark Pavia, an executive at media buying firm Starcom USA, which represents clients including Kellogg, Samsung Electronics and Mars. "I can spend 100 percent of my dollars, if you will, against only the people I want to get because of the purchase data," Pavia said. "That level of targeting is highly interesting."

THE DAY AHEAD

For April 25, 2013

ANALYSIS AND INSIGHT (continued)

BREAKINGVIEWS $50 bln buyback hike one sign of Apple middle age By Robert Cyran Apple's $50 billion increase in its share buyback program is a sign it is hitting middle age. The company is slowing down a bit. But the $380 billion Apple still has plenty of spring in its step. And its absurd level of financial comfort means it can give much more back to investors. Apple's 11 percent revenue growth in the quarter to March from a year earlier was well short of its previous breakneck pace. And the company's gross margin slipped to 37.5 percent and may fall further enviable for most companies, but not up to Apple's innovative best. The company blamed factors ranging from increased sales of lower-margin iPads to changes in service policies in China. Perhaps more telling is that the average selling price of an iPhone dropped by $20. Apple's ability to inspire fans to pay luxurious prices for its latest goods has weakened or perhaps with such huge scale it now has to tap less affluent customers. But Apple isn't yet 40 and it's too early to talk of decline, let alone decrepitude. Rivals such as Samsung are capturing a larger chunk of the expanding global market. But Apple's sales of smartphones are still rising, and tablets are booming with 65 percent more iPads sold in the recent quarter than a year earlier. Moreover, Chief Executive Tim Cook promises new products in the fall. Apple might even beat the odds by introducing another device that creates a whole category. A degree of aging also means financial security and a plan for the firm's cash pile, which has reached an astonishing $145 billion. That's far more than Apple needs, especially since to date at least it has wisely refrained from big acquisitions. The company is more than doubling the amount destined for shareholders' pockets to $100 billion by the end of 2015. That will make Apple the largest dividend payer in the world, according to the compilers of the S&P 500 Index. And the company has upped its planned share repurchases to $60 billion from $10 billion a sensible move while the stock looks undervalued on several metrics. David Einhorn, the vocal hedge fund manager, might prefer payouts structured his way. But other shareholders could justifiably conclude Apple is transitioning to maturity, not a mid-life crisis. CONTEXT NEWS Apple on April 23 reported revenue of $43.6 billion for the quarter ending March 30, an increase of 11 percent from the same period last year. Net income decreased 18 percent to $9.5 billion. The company sold 37.4 million iPhones in the quarter, 19.5 million iPads and 4 million iMacs. Apple also more than doubled to $100 billion the amount of capital it plans to return to shareholders by the end of 2015. As part of this plan, the company increased its quarterly dividend by 15 percent to $3.05 per share and its share buyback authorization from $10 billion to $60 billion. Apple will borrow in conjunction with the program. The company has $145 billion of cash and investments on its balance sheet, but a majority is overseas. Repatriating it would trigger a tax liability. (The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

THE DAY AHEAD

For April 25, 2013

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

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

AmerisourceBergen Altera Alexion Pharmaceuticals Amazon.com Biogen Idec Ball Bemis Company Bristol-Myers Squibb Boston Scientific BorgWarner Cameron Chubb Corp. CBRE Group Coca-Cola Enterprises Celgene Cerner Cincinnati Financial Colgate-Palmolive CMS Energy Consol Energy ConocoPhillips Dominion Resources Diamond Offshore Drilling The Dow Chemical Company Eastman Chemical Company EQT Corp Entergy Expedia Harley-Davidson Helmerich & Payne The Hershey Company International Game Technology KLA-Tencor Leggett & Platt L-3 Communications Holdings Southwest Airlines Mead Johnson Nutrition 3M Company Altria Group Noble Energy Occidental Petroleum MetroPCS Communications The Principal Financial Group Parker Hannifin PulteGroup PerkinElmer Range Resources Republic Services Raytheon Starbucks

Q2 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q2 Q1 Q2 Q3 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q3 Q1 Q1 Q1 Q1 Q1 Q2

$0.88 $0.33 $0.61 $0.09 $1.61 $0.64 $0.54 $0.41 $0.09 $1.24 $0.74 $1.74 $0.17 $0.38 $1.35 $0.63 $0.66 $1.32 $0.47 $0.19 $1.41 $0.90 $1.16 $0.61 $1.57 $0.53 $0.8 $0.23 $0.99 $1.29 $1.04 $0.29 $0.86 $0.38 $1.94 $0.02 $0.86 $1.65 $0.53 $1.23 $1.54 $0.09 $0.74 $1.67 $0.15 $0.48 $0.29 $0.41 $1.28 $0.48

$0.81 $0.35 $0.45 $0.28 $1.4 $0.63 $0.49 $0.64 $0.09 $1.28 $0.54 $1.70 $0.14 $0.36 $1.08 $0.54 $0.48 $1.24 $0.38 $0.42 $2.02 $0.85 $1.21 $0.61 $1.22 $0.50 $0.44 $0.26 $0.74 $1.13 $0.96 $0.27 $1.27 $0.30 $2.01 -$0.02 $0.82 $1.59 $0.49 $1.75 $1.92 $0.06 $0.70 $2.01 -$0.03 $0.43 $0.15 $0.38 $1.33 $0.40

$21,325 $414 $336 $16,145 $1,419 $2,092 $1,299 $3,876 $1,787 $1,831 $2,174 $3,024 $1,456 $1,905 $1,466 $708 $1,066 $4,296 $1,887 $1,272 $13,573 $3,439 $713 $14,879 $2,375 $427 $2,577 $968 $1,464 $824 $1,840 $572 $727 $963 $3,033 $4,072 $1,019 $7,806 $4,036 $1,082 $6,018 $1,293 $2,304 $3,340 $1,194 $532 $391 $2,003 $5,692 $3,586

THE DAY AHEAD

For April 25, 2013

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

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

Scana Corp Sigma-Aldrich Stanley Black & Decker Safeway Time Warner Cable United Parcel Service VeriSign Wynn Resorts Exxon Mobil Zimmer Holdings

Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1

$1.04 $1.00 $0.96 $0.36 $1.38 $1.01 $0.54 $1.56 $2.05 $1.40

$0.93 $0.99 $1.09 $0.30 $1.20 $1.00 $0.42 $1.33 $2.00 $1.30

$1,216 $673 $2,579 $10,161 $5,489 $13,462 $233 $1,375 $119,834 $1,142

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

The Day Ahead - North American Edition is compiled by Karan Khemani, Benny Thomas and Chandrashekhar Modi in Bangalore; Franklin Paul and Meredith Mazzilli in New York. THE DAY AHEAD - North American Edition is produced by Reuters News For questions or comments about this report, email us at: TheDay.Ahead@thomsonreuters.com Or call us at +91 80 4135 5929 Visit the Thomson Reuters Equities Community Site at: http://customers.reuters.com/community/equities/ For more information about our products: http://thomsonreuters.com/products_services Or send us a sales enquiry at: http://thomsonreuters.com/products_services/financial/contactus/ or call us on North America: +1 800 758 5555 2013 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. Any copying, distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

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