July 18, 2013

American Express Co.

Current Recommendation

NEUTRAL

Prior Recommendation

Outperform

Date of Last Change

03/04/2010

Current Price (07/17/13)

$76.80

Target Price

$81.00

(AXP-NYSE)
SUMMARY
American Express second quarter earnings topped the
Zacks Consensus Estimate, primarily driven by increased
card member spending and lower-than-expected operating
expenses. Alongside, improved net interest income and the
loan portfolio also drove the top line and book value.
However, higher loss provisions coupled with lower ROE
were the downsides. We expect lower borrowing on cards
along with rising payment of outstanding debt to raise
interest expense and impede loan fee income. We also
remain cautious about the scope of expense growth and
impact of regulations and lawsuits. Nevertheless, improved
credit trends, new business initiatives, capital flexibility and
stable ratings bode well for long-term growth, which is
reflected by the consistent dividend hike and accelerated
share buybacks. Overall, a spend-centric business model,
healthy capital and the targeted above-average payout
ratio warrant enhanced growth in a stable market over time.

SUMMARY DATA
52-Week High
52-Week Low
One-Year Return (%)
Beta
Average Daily Volume (sh)

$78.33
$53.64
32.95
1.78
5,428,939

Shares Outstanding (mil)

Market Capitalization ($mil)
Short Interest Ratio (days)
Institutional Ownership (%)
Insider Ownership (%)

1,099
$84,403
2.41
84
1

Annual Cash Dividend

Dividend Yield (%)

$0.92
1.20

5-Yr. Historical Growth Rates

Sales (%)
Earnings Per Share (%)
Dividend (%)

2.1
24.1
2.4

P/E using TTM EPS

16.7

P/E using 2013 Estimate

16.0

P/E using 2014 Estimate

14.5

Zacks Rank *: Short Term

1 3 months outlook

3 - Hold

* Definition / Disclosure on last page

2013 Zacks Investment Research, All Rights reserved.

Low,

Risk Level *
Type of Stock
Industry
Zacks Industry Rank *

Large-Growth
Fin-Misc Svcs
202 out of 267

ZACKS CONSENSUS ESTIMATES

Revenue Estimates
(In millions of $)

2011
2012
2013
2014

Q1

Q2

Q3

Q4

Year

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

7,031 A

7,618 A

7,571 A

7,742 A

29,962 A

7,587 A

7,965 A

7,862 A

8,141 A

31,555 A

7,881 A

8,245 A

8,190 E

8,604 E

32,920 E
34,789 E

Earnings Per Share Estimates

(EPS is operating earnings before non-recurring items, but including employee
stock options expenses)

Q1
(Mar)

2011
2012
2013
2014

Q2
(Jun)

Q3
(Sep)

Q4
(Dec)

Year
(Dec)

$0.98 A

$1.07 A

$1.03 A

$1.01 A

$4.09 A

$1.07 A

$1.15 A

$1.09 A

$1.09 A

$4.40 A

$1.15 A

$1.27 A

$1.20 E

$1.17 E

$4.79 E
$5.31 E

Projected EPS Growth - Next 5 Years %

www.Zacks.com

111 North Canal Street, Chicago IL 60606

11

RECENT NEWS
American Express Beats on Modest Card Spending

Jul 17, 2013

American Express reported its second-quarter 2013 operating earnings per share of $1.27. The result
outpaced both the Zacks Consensus Estimate of $1.21 and the year-ago quarter earnings of $1.15 a
share.
Consequently, net income from operations climbed 5% year over year to $1.41 billion from $1.34 billion in
the year-ago period.
American Express total billed business, or global card spending, continued to witness improvement in
the U.S. and beyond. This business grew 7% year over year to $237.7 billion. The upside came on the
back of an improvement in international cards-in-force, up 7% year over year to $78.0 million. Meanwhile,
cards-in-use also grew 7% in the U.S.
Behind the Headlines
American Express posted total revenue, net of interest expenses, of $8.25 billion, up 4% year over year
from $7.97 billion. The result breezed past the Zacks Consensus Estimate of $8.24 billion. The year-overyear upside in revenues was supported by moderate growth in card spending, net interest income and
loan portfolio. Further, delinquency rates and yield exhibited stability, partially offset by lower lending
balances.
However, provisions for losses were $593 million, spiking 29% from $461 million in the prior-year quarter.
The increase was driven primarily by lower reserve release, partially offset by lower net write-offs in the
reported quarter.
Meanwhile, American Express total expenses inched up 1% year over year to $5.66 billion in the
reported quarter. This reflected a rise in card member rewards, professional services and occupancy and
equipment expenses. These were partially offset by flattish salaries and benefits expenses along with a
decline in communication and other operating expenses. However, tax rate jumped to 30% from 29% in
the year-ago quarter.
Segment Results
U.S. Card Services reported net income of $743 million, up 3% from the prior-year quarter. Total
revenue, net of interest expenses, increased 5% to $4.2 billion from $4.0 billion in the year-ago quarter.
International Card Services net income came in at $208 million, up 17% from $178 million in the yearago quarter. However, total revenue, net of interest expenses, came in at $1.3 billion, flat from the yearago quarter, but up 3% on a constant currency basis.
Global Commercial Services net income improved 3% to $226 million from $219 million in the prioryear quarter. Total revenue, net of interest expense, inched up 1% year over year to $1.2 billion,
reflecting higher spending by corporate card members, while business travel commissions and fees
declined.
Global Network & Merchant Services reported net income of $412 million, up 11% from the prior-year
quarter. Total revenue, net of interest expense, increased 5% year over year to $1.4 billion, driven by
higher merchant-related revenues.

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Corporate & Other reported a net loss of $184 million compared with a net loss of $148 million in the
year-ago period.
Financial Update
As of Jun 30, 2013, American Express total assets stood at $152 billion (lower than $153 billion at 2012end), while long-term debt totaled $53 billion (down from $59 billion at 2012-end) against cash of $23
billion (up from $22 billion at 2012-end). Meanwhile, shareholder equity totaled $19 billion at the end of
the reported quarter, unchanged from 2012-end.
As of Jun 30, 2013 American Express ROE was 23.6%, down from 26.6% in the year-ago period. Return
on average common equity (ROCE) was 23.4%, declining from 26.3% in the prior-year quarter. Further,
return on average tangible common equity was 29.7%, down from 34.1% in the comparable period last
year. However, book value increased 4% year over year to $17.57 per share.
Stock Repurchase Update
During the reported quarter, American Express repurchased 19 million shares, at an average price of
$72.60, for a total of about $1.38 billion. Approximately 97% of capital generated was distributed to
shareholders through dividend payouts and share repurchases during the reported quarter.
Management also disclosed its plans to buy back shares worth $3.2 billion in 2013, followed by another
$1.0 billion of share repurchase in the first quarter of 2014. American Express plans to repurchase
shares worth $1.8 billion in the second half of 2013.
In Mar 2013, the board replaced the previous share repurchase program with a new one with
authorization to buy back 150 million shares.
Dividend Update
On Apr 30, 2013, the board of American Express hiked its regular quarterly dividend by 15% or $0.03 to
$0.23 per share. This is payable on Aug 9, 2013 to the shareholders of record as on Jul 5, 2013, and
marks the second dividend hike by the company since Nov 2007. In Mar 2012, this dividend was hiked by
11% from $0.18 a share, which was sustained even during the recession.
On May 10, 2013, American Express paid a regular quarterly dividend of $0.20 per share to shareholders
of record as on Apr 5, 2013.
Guidance
Management expects total revenue, net of interest expense, to grow by about 8% in 2013. Additionally,
earnings per share are expected to escalate by 12 15% over 2012, whereas ROE is estimated to be
25% or more.
Business Update
On May 29, 2013, American Express announced a strategic alliance with Citibank to launch Citi
PremierMiles American Express Card in Malaysia, which will be issued across Asia Pacific.

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VALUATION
American Express has been experiencing an impressive recovery in credit trends, with increased card
spending and strong billings over the last several quarters. Moreover, the company continues to focus on
tapping rapidly developing international markets through strategic acquisitions and alliances along with
development of products and technological services, which are also becoming a source of diversified
revenue mix. However, we expect the recovery to be tempered by the volatile global economy, higher
lawsuit and other expenses, ongoing DoJ litigation and the impact of new regulations facing the card
industry. These are also liable to make American Express credit cards costlier. Hence, we reiterate our
Neutral recommendation on the stock.
The shares of American Express currently trade at 16.0x our earnings estimate for 2013, at 12% discount
to the 18.2x for the industry average. On a price-to-book basis, the shares trade at 4.3x, at 5% premium
to the 4.1x for the industry average. The valuation on a price-to-book basis looks attractive, given a 12month ROE of 26.4% against the industry average of 19.9%.
Our six-month target price of $81.00 per share equates to about 16.9x our earnings estimate for 2013.
Combined with an annual dividend of $0.92 per share, this target price implies an expected total return of
6.1% over that period, which is consistent with our Neutral recommendation on the shares.
Additionally, the quantitative Zacks Rank for American Express is currently 3 , indicating no clear
directional pressure on the shares over the near term. Short interest is currently 2.4 days.

Key Indicators

P/E
F1

P/E
F2

Est. 5-Yr
EPS Gr%

P/CF
(TTM)

P/E
(TTM)

P/E
5-Yr
High
(TTM)

American Express Co. (AXP)

16.0

14.5

11.0

14.6

16.7

39.5

5.2

Industry Average
S&P 500

18.2
15.5

15.3
14.6

15.1
10.7

14.3
13.3

21.5
17.3

149.8
27.7

9.5
12.0

6.8
35.0

1.9
14.3

Orix Corporation-ADR (IX)

13.4
12.3
16.0
5.9
NA
Daiwa Securities Group Inc. (DSEEY)
7.7
7.5
36.0
12.8
18.6
TTM is trailing 12 months; F1 is 2013 and F2 is 2014, CF is operating cash flow

P/E
5-Yr
Low
(TTM)

P/B
Last
Qtr.

P/B
5-Yr High

P/B
5-Yr Low

ROE
(TTM)

D/E
Last Qtr.

Div Yield
Last Qtr.

American Express
Co. (AXP)

4.3

4.3

1.2

26.4

2.9

1.1

18.6

Industry Average
S&P 500

4.1
4.4

4.1
9.8

4.1
2.9

19.9
23.7

1.6
NA

1.5
2.1

3.5
NA

Equity Research

EV/EBITDA
(TTM)

AXP | Page 4

Earnings Surprise and Estimate Revision History

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NOTE

THIS IS A NEWS-ONLY UPDATE; THE REST OF THIS REPORT HAS NOT BEEN UPDATED YET.

OVERVIEW
Founded in 1850, New York-based American Express Company is a diversified financial services
company, with worldwide operations and a strong brand name. It is a significant player in charge and
credit payment card products, and travel-related services worldwide. The company is primarily organized
into two groups, the Global Consumer Group and the Global Business-to-Business Group.
American Express sells its products and services to various customer groups including consumers, small
businesses, middle-market companies, large corporations and banking and financial institutions through
various channels such as direct mail, online applications, sales forces and direct response advertising.
Considering a combination of factors, the company primarily operates through five reportable segments:
U.S. Card Services (USCS): This segment is aligned within the Global Consumer Group and issues
a wide range of card products and services to consumers and small businesses in the U.S., besides
providing consumer travel services to card-members and other consumers.
International Card Services (ICS): This segment is also aligned within the Global Consumer Group
and issues proprietary consumer and small business cards outside the U.S.
Global Commercial Services (GCS): This segment is aligned within the Global Business-toBusiness Group and offers global corporate payment as well as travel-related products and services
to large and mid-sized companies.
Global Network & Merchant Services (GNMS): This segment is also aligned within the Global
Business-to-Business Group. The segment operates a global general-purpose charge and credit
card network, which includes both proprietary cards and cards issued under network partnership
agreements. It also manages merchant services globally, which includes signing merchants to
accept cards as well as processing and settling card transactions for them. Further, this segment
offers merchants point-of-sale products, servicing and settlements and marketing programs.
Corporate & Other: This segment consists of corporate functions and supplementary businesses.
The corporate functions include the company s publishing business, Travelers Checks and other
prepaid products. Even the Enterprise Growth Group (EGG) program is reported under this
segment.

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During the fourth quarter of 2008, American Express became a bank holding company under the Bank
Holding Company Act of 1956. Since then, the Federal Reserve Board became the company s primary
regulator. As of Dec 31, 2012, American Express had 63,500 employees.
On Mar 14, 2013, the company s comprehensive capital plan (CCP) was approved by the Federal
Reserve, in order to increase its share repurchases and dividend payouts. Consequently, the Federal
Reserve sanctioned a share repurchase authorization worth 150 million shares. Alongside, a 15%
dividend hike was also initiated.

REASONS TO BUY
American Express has pulled itself out of the recession more quickly than its rivals, owing to its
creditworthy customers. Moreover, less reliance on revolving credit and back-end fees has helped
the company gain competitive advantage, while improving its overall risk profile. The company s
ongoing EGG program has been focusing on diversifying its revenue mix in the areas of ecommerce, mobile payments and fee-based businesses in emerging markets through business-tobusiness initiatives. The launch of the revolutionary prepaid debit card and the Target prepaid was
another such initiative to build a new revenue-generating platform targeting customers of bank
giants. According to Mercator Advisory Group, consumers used funds worth $40.8 billion through
prepaid cards in 2010, substantially up from $29 billion in 2009 and $19 billion in 2008. While the
trend remained considerably escalated throughout 2011 and 2012, the Group expects growth
momentum to peak at about $167.2 billion by 2014. The company is also focusing on operating in
the regulation-exempted category apart from enhancing its core processing capabilities. Moreover,
American Express established a $100 million fund in order to meet the expansion needs in digital
commerce. The recent shift toward EMV chip-based technology to accelerate mobile payments
along with the introduction of a Fraud Liability Shift policy and a new secure corporate payment
solution for middle- and high-level enterprises PAYVE should further strengthen the company s
digital platform. Such low risk and high return strategies are expected to generate 12 15% earnings
accretion in 2013.
American Express has potential for increased market penetration, merchant acceptance and brand
recognition as the company is expanding its list of network partners. Its Global Network & Merchant
Services business has been performing very well, with billed business or spending on cards growing
at a compound annual rate of 24% since 1999 and grew 28% year over year in 2010, followed by
modest growth of 15% in 2011, 10% in 2012 and 6% in the first quarter of 2013. Moreover, discount
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revenue has been witnessing an increasing trend, primarily driven by billed business volumes along
with travel commissions and fees and is one of its largest single sources of revenues. Further,
delinquency rates also improved meaningfully in 2011, 2012 and so far in 2013, reflecting a gradual
recovery in the fee-per-card and billed business from the recent global credit crisis. After witnessing
several quarters of downturn, net interest income and loan portfolio started improving over the past
few quarters, further instigating growth. A healthy and intelligent spending among customers has
also aided the company to record the lowest default rates in 2011, 2012 and thus far in 2013. We
expect spending on cards to improve further with the increase of network partners and merchant
acceptance, which will help the company generate high single-digit top-line growth and mitigate the
risk of volatile interest income growth.
American Express holds a leading position in the high-growth card payment and lending arenas and
has the ability to achieve strong inorganic growth despite sluggish progress and regulatory hassles
in the industry. The acquisition of General Electric Company s commercial card and corporate
purchasing business unit in Mar 2008 expanded its leadership in the commercial card marketplace.
Further, the acquisition of Internet-based payment service provider Revolution Money, in Jan 2010,
offered an innovative technology platform in 2011, Serve, to extend its leadership into the rapidly
growing person-to-person (P2P) mobile payment platform. The acquisition of Loyalty Partner in Mar
2011 brought in an additional 34 million consumers and has been driving the company s operating
efficiencies in key international markets, thereby adding value to the company s coalition partner s
business. The acquisition of Payment SDKs digital operating system, in Dec 2011, enabled
American Express to reach out to its merchants, third-party processors, gateways and point-of-sale
manufacturers across the globe. While the MoU with China UnionPay along with the strategic
alliances with ICBC, CMB, Lianlin, Bank of China and Tencent Holdings will strengthen the
company s position in the vast Chinese market, going ahead, the alliances with Barclays,
Scotiabank, Uralsib Bank, Isis, TNS, Morgan Stanley, Payfone, Verizon, Sprint, AOL, venteeprivee.com and Facebook will increase global market penetration.
American Express enjoys a strong capital position with a Tier 1 risk-based common ratio of 12.6% at
the end of Mar 2013, 11.9% at 2012-end, 12.3% at 2011-end and 11.1% at 2010-end, all of which
were well above the current regulatory requirement of 6% by the Federal Reserve. Armed with
excess cash and securities of $20.9 billion at end of Mar 2013 along with a strong operating cash
flow of $2.4 billion at the end of 2012, the company remains sufficiently liquid to finance its $17.0
billion in funding maturities through the first quarter of 2014. Operating cash flow further surged to
$189 million in the first quarter of 2013 from $3 million in the year-ago quarter. Moreover, improved
operating performance has paved the way for an increasing book value per share since 2008, and
resumption of share repurchases in the third quarter of 2011. Thenceforth, the company bought back
shares worth $2.3 billion in 2011, $4.0 billion in 2012 and $0.8 billion in the first quarter of 2013,
distributing about 70% of the capital generated through share repurchases and dividends in the
latest quarter alone. In Apr 2013, the company also hiked its dividend, while it projects share
repurchases of up to $3.2 billion in the last 9 months of 2013 and another $1.0 billion in the first
quarter of 2014, as it had its CCP sanctioned from the Federal Reserve. On a cumulative basis,
American Express has distributed 66% through dividends and share buybacks since its inception in
Dec 1994. Although return on equity (ROE) stood at 23.2% at the end of Mar 2013, management
aims over 25% of ROE and healthy capital ratios in 2013, in order to consistently invest 50% of its
excess capital in the business while paying out the remaining 50% to the investors through dividends
and share buybacks.
Besides basic cost cutting, American Express has also implemented a major re-engineering program
to increase efficiency and reduce activities that do not support its highest preference. The company
recorded post-tax re-engineering charges of $1 million in the first quarter of 2013 against $20 million
in the year-ago quarter, $323 million in 2012, $25 million in 2011, $74 million in 2010, $185 million in
2009, $434 million in 2008, $49 million in 2007 and $100 million in 2006. The restructuring activity is
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primarily related to rightsizing certain operations and headcount elimination to control its cost
structure given lower service volumes. Consequently, employee headcount is expected to decline by
4 6% in 2013. The company had generated $300 million from employee plans in the second quarter
of 2011. Moreover, the company is tightening its expenses in order to enhance margins and bottom
line, as reflected by a restricted 1% year-over-year increase in total expense in the first quarter of
2013. Going ahead, management aims to limit annual operating expenses to less than 3% in 2013
and 2014, while marketing and promotion expenses are expected to be about 9% of revenues.
Further, persistent improvement in loss rate continues to reflect progress from improved credit
quality. All these efforts are expected to drive the bottom line significantly.
Fair liquidity and a low risk profile of American Express also bode well for retaining the confidence of
the rating agencies. This even influenced Moody s to raise its ratings outlook on the company and its
subsidiaries to stable from negative in May 2011, while avowing its A3 rating on the long-term debt
and P-2 on the short-term debt. Further, in Jan 2013 and Apr 2013, both S&P and Fitch affirmed
their long-term debt ratings of BBB+ and A+ and short-term debt default ratings of A2 and F1 ,
respectively. Going ahead, the rating agencies expect continued stable earnings, ample liquidity,
strong risk-adjusted capitalization and better asset quality compared to peers. Moreover, adjusted
expenses are supposed to decline owing to cost containment measures and improved operating
leverage.

REASONS TO SELL
Despite the gradual global economic recovery, the company s net interest yields continue to remain
sluggish, reflecting lower revolving levels and lower balances at penalty rates due to improved credit
performance. Furthermore, a low interest rate environment continues to weaken the company s total
interest income that dipped 5% in 2011 from 2010. While interest income inched up 2% in 2012 and
3% in the first quarter of 2013, we do not expect any significant expansion to support the top line in
the visible future, as investment securities continue to fetch poor returns. Although the loan portfolio
improved marginally in 2011 and 2012, for the first time since 2008, a healthy recovery is far
stretched. Going ahead, interest yields will continue to be influenced by credit risk, the percentage of
the revolving portfolio and cost of funds. Moreover, as the credit cycle normalizes, the company is
focusing more on returning capital to investors rather than investing for business diversification,
which will tend to slower the growth rate in the near term.
As a result of the ongoing business building and re-pricing initiatives along with higher card member
reward and service costs, total expenses of American Express surged higher than expected in the
past years. Total expenses increased 13% year over year in 2011 and 6% in 2012. In addition,
provision for losses jumped 21% year over to $497 million in the first quarter of 2013 and surged to
$1.99 billion in 2012, after reducing to about $1.1 billion in 2011 from $2.2 billion in 2010 and $5.3
billion in 2009. An upside in the provision for losses is further expected for the rest of 2013 given
lower lending reserves, further indicating the need to increase loan loss reserves. An adverse
spending capacity, along with these factors, can further amplify operating risks. Hence, going
forward, the company has to exercise strict control on its expenses in order to maintain and expand
its margins along with bottom-line growth.
Although modest improvement has been noticed in billed business trends since the fourth quarter of
2009, revenue growth is likely to be restricted as a result of the sluggishness in average discount
rate that continues to mar the improvement in discount revenues. This represents fees charged to
merchants when members use their cards to purchase goods and services on American Express
network. However, in the recent years, the company has been under market pressure to reduce
merchant discount rates and undertake other re-pricing initiatives as a result of regulatory pressure
and non-U.S. competition. While the CARD Act more than offset the benefit of certain re-pricing
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initiatives made effective during 2009, the Consumer Protection Act signed in Jul 2010 further
threatens to adversely affect the card processing fees and contract credit offerings from financial
institutions, leaving ample room for uncertainty in the near future. Going ahead, these factors are
expected to be significant barriers to top-line growth. Management also estimated a consistent
annual decline in discount rate in the future.
American Express maintains substantial operations outside the U.S., while consistently growing
through acquisitions. The company generated about 30% of its total revenue from its non-U.S.
activities in 2010, 2011 and 2012. Therefore, currency fluctuations relative to the U.S. dollar, varied
tax rates and foreign exchange controls could affect commercial lending activities and decrease
revenue from international operations. This also exposes the company to interest rate volatility,
economic turmoil and regulatory stringencies across borders. These factors have also affected the
asset and equity returns of the company adversely in the first quarter of 2013 and full year 2012,
whereby ROE deteriorated to 23.1% from 27.7% in 2011 and 27.5% in 2010.
Although American Express transformation into a bank holding company has allowed it to
participate more in some government programs, it has also escalated the regulatory stringencies
associated with the bank holding companies. This not only deters financial flexibility but also
weakens the company s competitive edge amid economic volatility. Moreover, if the new
modifications in the U.S. regulatory capital standards are implemented as proposed, it may
decelerate Tier I capital and leverage ratios by about 30 bps and 10 bps, respectively. Further, in
Oct 2012, American Express was charged with $112.5 million as legal settlement as the company
was found guilty of charging undue fines for late payments on the cards since 2003. In 2010, the
U.S. Department of Justice (DoJ) sued the company along with the two other dominant players of
the industry, MasterCard Inc. and Visa Inc., alleging breach of antitrust law and manipulation of
policies in a way that prohibited the merchants from promoting the use of credit cards with lower
processing fees. Although MasterCard and Visa have settled issues by allowing higher discounts on
cheaper cards and reducing merchant discount rates, American Express has been fighting the
litigation as it believes that such government remedies are complex, non-beneficial for the
consumers and will create an anti-competitive environment, thus helping the two dominant players
who already enjoy over 70% market share. Nevertheless, we believe the process of litigation and a
probable adverse outcome could weigh on the company s financials in the future.

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DISCLOSURES & DEFINITIONS

The analysts contributing to this report do not hold any shares of AXP. The EPS and revenue forecasts are the Zacks Consensus
estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal
views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly,
related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this
report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to
accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet
the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an
offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a
position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the
securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to

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twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve
months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The
current distribution of Zacks Ratings is as follows on the 1016 companies covered: Outperform - 14.6%, Neutral - 78.5%, Underperform 6.1%.
Data is as of midnight on the business day immediately prior to this publication.
Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in
earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model
assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks
Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a
company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of
investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In
determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each
th
stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 group has the highest
values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the
second, third, and fourth groups of stocks, respectively.

Research Analyst

Meenakshi Sharma

Copy Editor

Neelanjan Barua

Lead Analyst

Meenakshi Sharma

QCA

Tanuka De

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