26 january 2018 markets research db today - us deutsche...

26 January 2018

DB Today - US

Periodical

AsiaNorth America

Strategy

DB Today - USDate26 January 2018

Deutsche Bank GroupMarkets Research

Friday, 26th January 2018

Today’s Morning Meeting AgendaNewell Brands - Renew ALL – Hitting the Reset ButtonStarbucks Corp. - Pouring Over The Results, Investors Becoming Concerned ByThe Slow DripAspen Insurance - Surprise "Kitchen Sink" Preannouncement May Impact PeersAlaska Air Group, Inc. - Could Mar Q mark a turning point for ALK shares?JetBlue Airways Corp. - Revenue momentum to continue; cost savings to rampinto YEAmerican Airlines Group - Solid Dec Q/2018 outlook; investors concerned withindustry dynamicsSouthwest Airlines Co. - 2018 set-up points to margin expansionCaterpillar - CAT Beats and Issues Guidance Above Expectations...Market Says'Meh'Oshkosh Corp - Mixed FeelingsUnited Rentals - Momentum Is Strong, But We Need More UpsideIron Mountain Inc. - $1.3b deal—Raise 18E; lower PT to $27Maxim Integrated - Strong growth and cash returns still underappreciatedEquinix - EQIX CEO resigns; LT positive thesis unchangedCognizant - Robust Demand for Digital Paints Solid Outlook

Additional Research:Initiations: NoneRecommendation Changes: None

Figure 1: Table of ContentsToday’s Highlights Page 01

Additional Research Page 06

Global Research 5

US Macro Forecasts / Market Data Items Page 17

Company Meetings and Investor Field Page 17

Corporate Access Page 17

Daily Revisions Page 18

DB Daily Page 21

Source: Deutsche Bank

TODAY’S HIGHLIGHTSMKC, Retailing / Department Stores & Broadlines, LOW, MCD, AJG, SLG, ABT,BIIB, Pharmaceuticals / Biotechnology, Pharmaceuticals, ES, AEP, Utilities andPower, Utilities and Power, EURN, FCX, HP, RES, EGHT, AVT, ADS, CCI, FLEX,KLAC, MSCC, TER, WDC, MSTR

Newell Brands (NWL) - Renew ALL – Hitting the Reset ButtonTgt USD33 to USD23. While updating FY17 guidance (mostly negative, with theexception of better implied FCF), providing an initial FY18 outlook (disappointingvs. our prior forecasts), and announcing the resignations of Martin Franklin, IanAshken, and Domenico De Sole from the Board of Directors (likely to be readnegatively from the market's perspective), Newell (NWL) today made a series ofsignificant announcements that hopefully will result in a simpler (i.e., less complex

Amy Tan

Equity Focus

+1-212-250-5574

Tim Pierotti

Equity Focus

+1-212-250 8143

Mairead Smith

Equity Focus

+44-20-754-71054

Mark Braley, ACA

Research Analyst

+44-20-754-59904

Deutsche Bank Securities Inc.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. THE CONTENT MAY NOT BE DISTRIBUTED IN THE PEOPLE ’ SREPUBLIC OF CHINA (“THE PRC”) (EXCEPT IN COMPLIANCE WITH THE APPLICABLE LAWS AND REGULATIONS OFPRC), EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAU.

Distributed on: 26/01/2018 10:12:09 GMT

7T2se3r0Ot6kwoPa

26 January 2018

DB Today - US

in terms of number of customers, SKUs, etc.), more fully consumer-facingbusiness (NWL effectively intends to divest its more commercial-centric "Work"and "Other" segments), but will also add to near-term complexity and prolongeduncertainty over pro-forma financial forecasts. On balance, understanding andagreeing with NWL's motivations, we read the announcements in aggregate asnegative for the stock's valuation (consistent with intraday trading). Last CloseUSD31.23, (Steve Powers) NWL

Figure 2: INDEXClose 1D YTD

% Chg % Chg

S&P 500 2839.25 0.1 6.2

NASDAQ 7411.16 -0.1 7.4

DOW 26392.79 0.5 6.8

DJ STOXX 50 7643.14 0.4 -0.6

FTSE 100 INDEX 33154.12 1.5 10.8

HANG SENG INDEX 23631.88 -0.2 3.8

MSCI Asia ex Japan 83680.00 3.7 9.5

BRAZIL BOVESPA N.A. N.A. N.A.


Figure 3: SECTOR WRAPOil & Gas Drilling 3.2%

Food Retail 2.6%

Construction Materials 2.4%

Worst Sectors

HSWRES&SPEC -20.6%

Airlines -3.5%

Railroads -3.3%


Figure 4: COMMODITIESClose 1D YTD

% Chg % Chg

West Texas 65.61 -0.2 8.6

Brent 70.06 0.3 4.9

CRB 199.34 -0.1 2.8

Copper 322.15 0.2 -2.4

Gold (Spot) 1355.16 0.5 4.0

Alum. (LME) 2241.00 -0.4 -1.2

Baltic Dry 1217.00 1.4 -10.9


Figure 5: FOREX (vs US$)Close 1D YTD

% Chg % Chg

HK$ 7.82 0.0 -0.1

EUR 1.25 0.5 3.8

JPY 108.95 0.4 3.4

GBP 1.42 0.6 5.3


Starbucks Corp. (SBUX) - Pouring Over The Results, Investors BecomingConcerned By The Slow DripTgt USD62 to USD63. Holiday left the stocking a little bare. Once a drivingforce for Starbucks, the holiday season has become an increasingly challengingquarter and F1Q18 was no different as mixed results leave us sifting throughthe results for gifts. SBUX remains an unquestionably strong brand with solideconomics and among the most revered technologies, but the recent sales trendsand profit outlooks have created an environment where Bulls and Bears havefound alternating times to take stands. We rate SBUX shares a Buy as therecent resets, unit-level, product, marketing, technology and global initiatives allrepresent opportunities for the business to re-accelerate, but we have become alittle more cautious on the slower SSS trends. Last Close USD60.55, Buy. ( BrettLevy) SBUX

Aspen Insurance (AHL) - Surprise "Kitchen Sink" Preannouncement May ImpactPeersTgt USD45to USD42. 4Q17 Net Underwriting Loss Totals $245mn. After a$335mn underwriting loss for 3Q17 largely due to three major hurricaneshitting the U.S., Aspen announced it would take a $245mn underwriting loss in4Q17. While Aspen's $135mn loss pertaining to the spate of California wildfiresthroughout 4Q17 appears alone outsized, the company is additionally incurringsizable losses pertaining an increased frequency of mid-sized and attritionalprimary insurance losses, which include property and fire-related losses in theU.K. and the U.S. and, to a lesser extent, cyber losses. Additionally, the companywill increase its provisioning for a previously reported surety loss. Whereas the3Q17 losses represented a challenge to catastrophe risk management, theseattritional losses highlight a weakness in the broader underwriting culture. LastClose USD41.3, Hold. ( Joshua Shanker) AHL

Alaska Air Group, Inc. (ALK) - Could Mar Q mark a turning point for ALK shares?Tgt USD89 to USD75. Solid Dec Q; encouraged by decelerating capacity growth.ALK reported Dec Q diluted EPS (ex-specials) of $0.83, just ahead of our forecastand the consensus estimate of $0.82. Additionally, the Board approved a 7%increase in its quarterly dividend from $0.30 to $0.32 per share (implies ~2.1%dividend yield). While we view these results as encouraging, management wasupfront about the "substantial" competitive capacity pressures Alaska is facing inits markets, as well as the fact that these competitive capacity adds will continueto put pressure on unit revenue going forward (Alaska is guiding to Mar Q RASMof -3.5% to -4.5% vs. Dec Q's -7.6%). Management also gave investors an updateon the company's merger with Virgin America. Alaska now has all of the costsof the combined companies with very little of the revenue benefit, pointing tofurther earnings upside going forward. Additionally, Alaska's growth is set tomoderate in FY 2018 (up ~7.5%) and subsequently slow to ~4% in 2019 and 2020,which should drive better unit revenue performance. Furthermore, the company'sCAPEX guidance implies a meaningful slowdown, falling from ~$1 billion in 2017and 2018 to $750 mm in both 2019 and 2020 respectively, which will create a


26 January 2018

DB Today - US

compelling Free Cash Flow story going forward; Buy. Last Close USD62.07, Buy.( Michael Linenberg) ALK

JetBlue Airways Corp. (JBLU) - Revenue momentum to continue; cost savingsto ramp into YETgt USD31 to USD26. Revenue momentum to continue; cost savings to rampinto YE. JBLU reported Dec Q 2017 diluted EPS of $0.32, in-line with our forecast,but just shy of the $0.34 consensus. The results was down from last year's $0.50EPS, but negatively impacted by Hurricanes Irma and Maria ($0.09 hit to EPS)and the tax reform employee bonus ($0.04 hit to EPS). The company producedRASM growth of 1.8% (including negative 70 bps impact from the hurricanes),in-line with its latest guidance, but much better than original guidance of flatto down 3%. Looking forward, the company is expecting Mar Q RASM growthof 2.5% - 5.5%, the midpoint of which was just ahead of our buy side surveyresult of +3.9%. Management expects positive revenue trends to continue andnoted that the recovery in hurricane-affected Puerto Rico was occurring faster-than-expected. On the cost front, 2018 CASM ex-fuel guidance of down 1% toup 1% was slightly better than our +0.5% (at the time of the announcement;now forecasting CASM ex-fuel -0.1%) at the midpoint as the company expectsbenefits from its ongoing $250 - $300 mm per annum cost savings program toramp up in 2H18 ($90 mm in costs savings were achieved in 2017). We expectcontinuing revenue momentum and ex-fuel cost benefits to drive higher qualitypretax earnings (EPS also benefits from tax reform) and therefore reiterate ourBuy. Last Close USD20.69, Buy. ( Michael Linenberg) JBLU

American Airlines Group (AAL) - Solid Dec Q/2018 outlook; investors concernedwith industry dynamicsDec Q beat; 2018 EPS guide positive, but investors question underlying RASM.AAL reported Dec Q diluted EPS (ex-specials) of $0.95, ahead of both our$0.90 forecast and consensus of $0.87 (both up ~$0.20 from two weeks ago).Underlying the result was a 7.0% pretax margin, down just 90 bps y-o-y despitea 23% increase in the company's fuel bill. The company produced RASM growthof 5.6%, just above the midpoint of its latest guidance of +5.0% - 6.0% (originalguide was +2.5% - 4.5%) as all regions ended the year in positive territory(FY unit revenue growth was also positive across all regions). Managementexpect positive revenue momentum to continue and are guiding to Mar Q RASM+2.0% - 4.0% - which would make it the 7th consecutive Q of positive unitrevenue . Management also introduced FY 2018 EPS guidance of $5.50 to$6.50 which compared favorably to our prior 2018 EPS estimate of $5.45 (weraised our forecast to $5.50, see below) and $5.26 consensus at the time ofthe announcement. Despite all of the aforementioned positives, the stock closeddown 3% on concerns around industry capacity growth rates (following United'sannouncement Tuesday after the close of ~5% per annum capacity growth 2018- 2020) and the doubt that casts on AAL's 2018 EPS forecast given it implies ~3%- 4% unit revenue growth. While we also are keeping a close eye on the supply-demand equation, we agree with American's CEO Doug Parker who noted thatincreasing capacity in an airline's hubs does not typically induce an aggressivecompetitive response. Additionally, AAL will benefit from FX and fuel surchargetailwinds in its international markets and its own revenue initiatives (premiumeconomy, annualization of Basic Economy rollout, among others). As such, weare more sanguine on both the industry and AAL's outlook than the market; Buy.Last Close USD53.05, Buy. ( Michael Linenberg) AAL

Southwest Airlines Co. (LUV) - 2018 set-up points to margin expansionSolid Dec Q and 2018 outlook. Southwest reported Dec Q 2017 diluted EPS (ex-specials) of $0.77, in-line with consensus of $0.77, and one penny better than


26 January 2018

DB Today - US

our estimate of $0.76. Southwest is guiding to FY 2018 CASM ex-fuel of flat todown 1.0%, and the company expects to achieve positive unit revenue growth in2018. Additionally, Southwest is guiding to FY 2018 capacity "in the low 5 percentrange." Southwest is also set to benefit from several cost tail winds in 2018, thelargest of which is ~$200 mm of maintenance, repairs, and depreciation benefitsrelated to the retirement of the 737 Classic fleet. The company will also seeincremental revenue opportunities from its new reservation system, which willenable Southwest to improve its dynamic pricing capabilities, and better managecompetitive pressures (estimated 2018 pretax benefit of $200 mm). We believeSouthwest has one of the industry's few (maybe only) margin expansion storiesof 2018; Buy. Last Close USD60.19, Buy. ( Michael Linenberg) LUV

Caterpillar (CAT) - CAT Beats and Issues Guidance Above Expectations...MarketSays 'Meh'Tgt USD154 to USD174. Usually not a good sign when a beat/guidance abovecons does not move stock higher. When we saw CAT's 4Q release this morning,we felt convicted that the stock would outperform - revenue beat the Street by9%, segment incremental margins remained robust at 51%, and the companyinitiated 2018e guidance of $8.25-9.25, well above the ~$8.00 bogey we hadbeen hearing from investors in the weeks leading up to the print. So, why didthe stock trade flattish on the day? We think CAT is the most consensus long inour coverage universe, and our conversations suggested that most buy-side bullsalready viewed $9+ EPS as the likely outcome for 2018e - suggesting less positivemomentum vs. the high end of new guidance than expected (i.e. the beats andraises get tougher from here). We note that it isn't typically a good sign whensuch a strong result is met with a tepid market reaction - we think there are fewincremental buyers of CAT waiting on the sidelines at these levels. Last CloseUSD169.37, Hold. ( Nicole DeBlase) CAT

Oshkosh Corp (OSK) - Mixed FeelingsTgt USD90 to USD99.Beat driven by Defense margins, and backlog growth wasrobust. There was plenty of good news in OSK's earnings results, and the factthat the stock was not a consensus long into the quarter (we had heard a lot ofcaution into the quarter predicated on anticipated Access margin weakness - inline with our own views) helped drive it up 2% today. We think this was deservedfor several reasons: 1) EPS beat cons by 50%, and upside to our model was drivenby better Defense segment results, 2) Access orders grew 94% Y/Y, taking thebacklog up by 2.5x, 3) Management unexpectedly raised full year EPS guidanceby 17% at the midpoint. Last Close USD95.33, Hold. ( Nicole DeBlase) OSK

United Rentals (URI) - Momentum Is Strong, But We Need More UpsideTgt USD175 to USD185. Another case of 'strong print + consensus long = shareprice underperformance'. We are beginning to notice a theme this quarter -positioning seems to matter even more so than usual; we viewed CAT and URI asthe most consensus longs in the Machinery group going into earnings, and bothseemed to suffer from a case of overly high expectations. We did not have much topick on in URI's earnings release - the results were strong (both at the top line andwith respect to drop-through), and 2018e Adj. EBITDA guidance of $3.6-3.75bnwas essentially in line with our own expectations (as per our 4Q17 preview) andsuggested considerable upside to $3.59bn cons. Last Close USD181.91, Hold.( Nicole DeBlase) URI

Iron Mountain Inc. (IRM) - $1.3b deal—Raise 18E; lower PT to $27Tgt USD30 to USD27. Lowering PT to $27 from $30 on $1.3b IO deal + slowingorganic growth. We lower our PT to $27 from $30 as we refresh 2018E for the


26 January 2018

DB Today - US

$1.3b IO data center (DC) deal, introduce 2019E + roll forward our valuation.Despite recent underperformance (IRM/S+P 500 -5%/+6% YTD), we believe theIRM stock will continue to lag as slowing fundamentals (-20bps organic volumein Q317 NA storage more than offset recent price increases) pressure the IRMmultiple in advance of Q417 earnings + 2018 guidance (2/16). We also note thatwhile the organic decline in North America (NA) storage volume was modest, itcoincided with decelerating new sales + new volume from existing customers. Webelieve this implies pricing increases are being met with mixed reaction + couldlead to further organic volume declines + less robust pricing in NA. As such, wemodel ~40bps of overall internal growth deceleration in 2017E-18E (1.9%/1.5%)amid uneven service revenue + slowing storage. Last Close USD35.82, Sell.( Kevin McVeigh) IRM

Maxim Integrated (MXIM) - Strong growth and cash returns stillunderappreciatedTgt USD60 to USD65. For the second consecutive quarter, MXIM delivered solidresults and guided well above DB/Street expectations as the company benefitsfrom broad-based strength across its core Industrial and Automotive markets,as well as a seasonal pop in Consumer. Even with our estimates taking aconservative tact for the Jun-qtr (Consumer down) and beyond (cyclical slow-down), our estimates for FY18/FY19 rise by +8%/+5%, respectively. Overall,MXIM remains our top pick as we believe the current valuation discount vs high-quality peers (~20% on EV/FCF basis) still fails to reflect the company’s improvingrevenue growth/quality, margins and cash returns to shareholders (80% of FCFmoving to 100% post tax reform). Reiterate Buy rating and raise P/T to $65. LastClose USD55.12, Buy. ( Ross Seymore) MXIM

Equinix (EQIX) - EQIX CEO resigns; LT positive thesis unchangedDisappointing news, but no change to our positive long-term outlook. Though weare surprised and disappointed by the news of EQIX CEO Steve Smith's abruptresignation from his role as CEO and from the Board, we see no change to ourpositive long-term thesis, which is predicated on 1) the rapid growth in data traffic2) EQIX's formidable business moat 3) attractive upper-teens EBITDA and AFFO/sh growth over the next several years. As such, we reiterate our BUY rating andwould use any weakness on the news to add to positions. Last Close USD439.17,Buy. ( Vin Chao) EQIX

Cognizant (CTSH) - Robust Demand for Digital Paints Solid OutlookExpecting conservative FY18 revenue guidance. On Feb 7th before the open, weest. CTSH to report 4Q17 revs of $3,828m (10.6% Y/Y, 1.7% Q/Q) and EPS of $0.96.Solid broad-based momentum led by adoption of digital (~27% of revs growing~25%) should continue to drive high-single digit organic growth in the qtr alongwith acquisition contribution. For FY18, we expect the company to conservativelyguide for ~8-10% rev growth (same as last year to stay consistent) driven bysustainable organic growth with acquisitions and improving FX trends helpingoffset lapping of the Emblem Health win (impact began mid-3Q17). In addition,CTSH should benefit from +100bps of margin expansion in FY18 and FY19 withmodest margin expansion thereafter as well as accelerated share repurchases(ASR). We believe the company will pursue incremental capital return or M&Afrom repatriation of non US funds and ongoing FCF benefits from the US movingto a territorial tax system. Although H-1B noise has created headline risks, webelieve the risk from material legislation getting through Senate is unlikely andwill continue to monitor developments while incremental changes from the Trumpadministration should be manageable. In-all, we believe valuation continues to


26 January 2018

DB Today - US

look attractive particularly given the company is growing revs above the peergroup average. Reiterate Buy. Last Close USD77.95, Buy. ( Bryan Keane) CTSH

ADDITIONAL RESEARCH

ECONOMICS

US Economic Notes - Q4 2017 GDP preview: Three consecutive threes?This morning's advance GDP report for Q4 2017 will provide a benchmark forforecasters’ current-quarter and 2018 growth projections. If our Q4 estimateis close to the mark, it would be the third consecutive quarter of 3%-plusinflation-adjusted output growth, with the economy closing out the year havingexpanded 2.7% (Q4/Q4) – the best performance since 2014 (2.7%). As such, wehave also modestly revised up our 2018 growth forecast, as we detailed in ourcomprehensive note on tax reform last week. Importantly, if Congress were topass a spending bill that raises defense and nondefense spending caps along thelines currently being discussed in Washington, there is further upside risk to our2.4% (Q4/Q4) real GDP growth projection for this year. (Brett Ryan) Economics

CONSUMER

McCormick (MKC) - Defending the NarrativeTgt USD98 to USD99. Private label pressure in the U.S. still our main concern.Although management pointed to distorted tracked-channel growth trends givenWalmart’s conversion of one of McCormick’s brands (namely 5th Season) toprivate label and an essentially immaterial profitability effect from such a shift,we still find private label pressure in the U.S. a core risk to McCormick’s brandedbusiness. If we strip out 5th Season from private label in the last three months ofCY’2018 in the core extracts, herbs, spices, and seasonings categories (EHSS),we see ~375 bps of private label dollar share gains in tracked channels and~270 bps of volume share, which remain elevated despite our normalized 5thSeason adjustment. While we understand that non-tracked channels can growmore quickly than retail data trends may suggest, and international markets canoutgrow the U.S., Walmart’s U.S. moves still matter to us and remain a risk, inour opinion. Considering the data shows private label taking significant categoryshare since the end of 2016, this recent brand conversion isn’t the core driverof a larger, longer-running trend. And given 5th Season’s volumes were down~20% pre-conversion in 2018 in tracked channels, we’re not shocked Walmartdecided to convert the brand to private label and potentially drive velocities vialower pricing and higher promotional spend. Last Close USD105.09, Sell. ( RobDickerson) MKC

Discounter/Dollar Round-Up - Vol. 8: WMT vs. Aldi Pricing Study; Sam'sClosures; Dollar Store Bull CaseIn the 8th volume of our discounter & dollar store periodical, we revisit our annualFlorida-based Walmart vs. Aldi pricing study, explore the potential benefit to COSTcomps from Sam's 63 closures (we calculate ~115 bps), update models for higher4Q comps (20-50 bps) and lower tax rates, make the bull case for the dollar storesector (we are all in with four Buy rated names: DG, DLTR, FIVE, and BIG), andround up relevant data points.Pricing Study: Aldi Clear Leader; WMT NarrowsSpread Marginally. (Paul Trussell) Retailing / Department Stores & Broadlines


26 January 2018

DB Today - US

Figure 6: Discounter/Dollar Round-Up


Lowe's Companies (LOW) - Four Read Through Charts for LOW (and two forHD)Four read through charts for LOW (and two for HD). We have seen four datapoints relevant to LOW so far this week, two of which are also read throughs forHD. We believe the reads are mixed, skewing to the softer side. Nonetheless, weremain comfortable with our 4Q comp estimate of 3.5% for LOW, which is aboveFactset consensus of 2.8%. This would be a deceleration from 5.7% in 3Q, asLOW is up against a 240 bps more difficult comparison. For HD, we are at 7.0%versus Factset consensus of 6.4% and 7.9% in 3Q. Although the data points dotend to point to a deceleration this year, as we have noted in the past, in 7 ofthe past 8 years, 4Q comps have accelerated versus 3Q for both HD and LOW(thus accelerating against tougher comparisons) as each has leaned more into4Q holiday sales, in our view. Looking ahead into 2018, we believe LOW shouldbe able to generate 2018 EPS of $6+ helped by a lower tax rate and includingreinvestments (see our note from January 22 titled "The LOWdown on Lowe’s"for more details on our outlook). Last Close USD106.38, Buy. ( Mike Baker) LOW

McDonald's Corp. (MCD) - "Mac" Back On The Attack; Thoughts Ahead of4Q17 Results4Q17 EPS conference call: Jan. 30, 11am; 844-353-1873; code: McDonald's.McDonald's is scheduled to release its fourth quarter results 1/30/18 beforemarket open and expectations are high for the industry leader (in terms of scaleand sales performance) as its robust market share gains have persisted versusits QSR peers. An update on the sales cadence continues to be top of mind forthe Street, but with numerous competitive and strategic initiatives underway, webelieve investors may care about more than simply the top line. Our Buy rating onMCD's shares is the result of solid sales and operating results, ongoing strategicimprovements (that are aligned with its owners'/operators' interests) and solidcash flow generation and capital returns. Last Close USD175.66, Buy. ( BrettLevy) MCD

FINANCIALS

Arthur J. Gallagher (AJG) - Significant Uptick in Organic Growth TrendTgt USD65 to USD69. Gallagher reports operating EPS of $0.82. This is aclear beat compared to our forecast of $0.71 and consensus of $0.75. Thebeat was primarily driven by strong underlying organic growth of 6%, namelyin the Brokerage segment. While organic exceeded our expectations in bothsegments, Brokerage was particularly notable reporting 6.8% v. our expected4%. Risk management exceeded our forecast by 30bps, reporting 3.3%. On theearnings call, management noted that it expects similar organic performancein both segments across 2018. However, in the event that P&C pricing postsimprovement, there could be upside in the Brokerage segment. We are holdingsteady our forecast of 5% for organic growth in the Risk Management segmentcompared to 5.2% for FY17. We have increased our expectations for Brokerageorganic growth to 4.5%, in line with the 4.4% posted for FY17. We do not expect


26 January 2018

DB Today - US

substantial pricing changes in 2018 as a result of the active 2017 catastrophe yearother than in directly impacted lines in affected regions and have concerns thatthe pricing acceleration will weaken as the benefits of tax reform work their wayinto more moderate P&C pricing. However, to the extent that pricing improvesmore than we assume, there could be upside risk to our forecast. Last CloseUSD65.65, Hold. ( Joshua Shanker) AJG

SL Green Realty (SLG) - 4Q17 Review - SL Green Realty - 4Q17 ReviewTgt USD110 to USD111. Remain at Hold given our cautious sector outlook.We thought the quarter was largely in-line with expectations, but note thatmanagement commentary was positive, with the team highlighting strong assetpricing, active leasing demand (particularly at One Vanderbilt where activity is upvs. 6 months ago), and a healthy DPE environment. Additionally, SLG noted thatrepurchases remain an attractive use of capital as the company had an active 4Qon the share buyback front and appears to have bought 1m additional shares in1Q so far. That said, given our cautious outlook for the Office sector broadly, risingNYC supply, and the delayed nature of any potential tax reform related demandupside, we remain at Hold. Last Close USD96.49, Hold. (Vin Chao) SLG

HEALTH CARE

Abbott Laboratories (ABT) - Strong finish to '17 + Strong outlook for '18Tgt USD62 to USD71. DB take: We Reiterate our Buy Rating and Raise our PriceTarget to $71. Abbott reported another strong quarter, beating Street estimateson both the top and bottom line. Comparable constant currency growth of7.7% represents a second quarter of accelerating organic growth following 1H17growth of ~3%. We believe the inflection from low-single digit to mid-single digitgrowth is sustainable, driven by new product launches in the Medical Devices andDiagnostics segments as well as strong industry trends in Established Pharma.We believe Abbott has the necessary pieces to drive consistent at least mid-singledigit top line and double digit bottom line growth. We reiterate our Buy rating.Given the positive results and the strength in the underlying business, whichwe expect to continue, we are raising our price target to $71 to reflect a targetmultiple of 25x (up from 22x) our 2018 EPS estimate of $2.85. Since the spin-offof its branded pharmaceutical business in January 2013, ABT shares have tradedat an average 13% premium to the S&P 500. Our target multiple applies a 15%premium to the S&P 500 multiple (22x). This multiple is also consistent with whereABT Is trading on a trailing basis (on 2017 EPS) and where other high-growthMedTech peers are trading. Last Close USD63.22, Buy. ( Kristen Stewart) ABT

Biogen (BIIB) - Thoughts on 4Q Results: Setting the Stage for An Eventful 2018Tgt USD358 to USD373.What’s new? MS franchise holding steady with capitalallocation front and center. While 4Q17 results and initial 2018 financial guidancesuggest continued resilience of the core MS franchise as well as further strengthof the Spinraza launch, we expect investor focus for the remainder of 2018 to beon potential capital allocation decisions (ie strategic M&A etc.) with managementhighlighting a clear desire to expand the portfolio and remain flexible on thesize and type of potential transactions. As such, with the company outlining thestrategy and financial capability for possible deal-making, we continue to seea favorable risk/reward for the stock on the basis of stable cash flow from thecore franchises, as well as pipeline and portfolio optionality. While questionson the long-term trajectory of the core MS business are reasonable (ie impactof new product entrants, generics, etc.), we think the near-term trajectory andfinancial guidance underscore the stability of the franchise (including payerefforts) which is the core driver of the cash flow generation potential the companyhas recently highlighted. While the phase-3 aducanumab data remains the key


26 January 2018

DB Today - US

(transformative) catalyst for the company, this year will feature several key read-outs, including phase-2 Tysabri stroke data expected shortly. Overall we thinkthe quarter reflects a good start to the year, and we reiterate our Buy rating andare raising our price target to $373 (from $358). Last Close USD353.74, Buy.( Andrew Peters) BIIB

China Watch P268 - Near-term catalysts for large cap namesMore positive catalysts to emergeWe expect the following catalysts to emergein the near term, which would be positive for Sino Biopharm, CSPC, 3S Bio andHengrui. ( Jack Hu) Pharmaceuticals /Biotechnology

Specialty Pharmaceuticals - 4Q Generic competitive intensity analysisIn this note, we assess changes in competitive intensity (CI) for our genericscoverage group in 4Q, based on: 1) new generic approvals and launches by eachcompany, and 2) competitive approvals and launches against each company.Some high-level observations: 1) ENDP and IPXL had the highest sales exposureto new competitive generic approvals in 4Q, 2) ENDP and IPXL also had thehighest sales exposure to new competitive generic launches in 4Q, and 3) ENDPand LCI may have benefitted the least from generics launched in 4Q. Overall, ouranalysis suggests that ENDP and IPXL may have faced the greatest headwindsto generics growth in 4Q. We already model significant generic sales erosionfor ENDP, although we model modest growth for IPXL. While we believe ourCI analysis can help provide a qualitative sense of the “quality” of a quarter, itis difficult to extrapolate to actual generic sales performance, and we are notchanging our models based on this analysis. In addition, none of these companieshave pre-announced 4Q results.(Gregg Gilbert) Pharmaceuticals / Specialty

INDUSTRIALS

Eversource Energy (ES) - Hindsight is 20/20Tgt USD66 to USD69.MA selects Northern Pass as winner of Clean Energy RFP.This afternoon, the MA Department of Energy Resources and state's electricdistribution companies announced that Eversource and Hydro-Quebec's NorthernPass project had been selected as the sole winning bidder in the MassachusettsClean Energy RFP. While the final acceptance of the bid and contract award (i.e.PPA) is conditional upon successful negotiation and state regulatory approval, weview this as a big win for ES. The $1.6B investment still needs sign off from theNew Hampshire Siting Evaluation Committee (NH SEC) to move forward, but overthe past year we have increasingly thought that winning the MA RFP was the morecritical hurdle. Therefore, assuming siting approval in NH in the coming weeks(discussed more below), construction on the Northern Pass Project - somethingwe've been writing about for almost a decade - would commence in the middle ofthis year and likely conclude in late 2020. Last Close USD64.57, Hold. ( JonathanArnold) ES

American Electric Power (AEP) - Weathering the tax stormGrowth expectations reaffirmed despite higher 'tax reform' financing needs. AEPkicked off utilities and power sector earnings today and therefore became thefirst utility to formally discuss the impacts of tax reform on their financial plans.Overall, AEP expects to end up in about the same place from an EPS growthstandpoint and reaffirmed long-term growth targets of 5-7% per year as well astheir previously provided 2018 EPS guidance of $3.75-$3.95. While the changesto AEP's financial plan required by tax reform were not perfectly aligned with ourexpectations, the overall outcome was and we therefore reiterate our 2018-2020EPS forecasts of $3.85, $4.10, and $4.35 and our $75 price target. Our upgradelast week was prompted by the stock having lagged peers by >300 basis points


26 January 2018

DB Today - US

YTD and a 5% P/E discount to peers. We saw this as unwarranted, with AEPoffering above average and lower risk growth (no big projects required to achieve5-7%) and favorable relative positioning versus tax reform despite apparent fearsto the contrary. While the stock has closed the gap modestly, we continue to seea good opportunity to pick up a transmission growth story, with utility rate baseCAGR of roughly 9% (up from 8% on tax reform). We also see the potential forupside to our 2020E and PT should AEP secure approval to move forward with the$4.5B Wind Catcher project, a 2,000 MW wind farm and associated transmissionin Oklahoma. Neither our Buy call nor our estimates are premised on successfulexecution of this project, however. Last Close USD69.7, Buy. ( Jonathan Arnold)AEP

DB Power Flash - Cali wildfire update: State of the State; key dates to watch onthe legal frontGovernor Brown highlights wildfire risk on his final State of State addressEarliertoday Governor Jerry Brown delivered his State of the State address to theCalifornia legislature. This was Brown's final State of the State and, as such,something of a high level swan song rather than a platform for articulating specificpolicy details. This said, recent wildfires and mudslides did receive a significantmention early on in the speech, with the governor first thanking firefighters, firstresponders and volunteers before going on to paint the issue in broad termsagainst the canvas of climate change. This positioning aligns with comments byothers including CPUC President Picker and PG&E's CEO Williams. In his remarksBrown noted increases in modern-day population levels in the state having "nolong term precedent" and the fact that the wildfire season has increased by78 days over the last four years, now extending almost year-round in someareas. He described fires and mudslides as a "profound and growing challenge"while referencing plans to convene a task force of experts to focus on forestmanagement and making recommendations to reduce the threat. ( JonathanArnold) Utilities and Power

DB Power Flash - Trenton talks nuclear - 2018 EditionNuclear bill resurfaces in New Jersey Senate; new focus on GHG emissionsTheNew Jersey Senate Environment and Energy Committee heard several hoursof testimony this afternoon on a new bill offering support for nuclear powerplants in the state. The bill posted to the agenda was originally identical tothe one that sailed through a joint House and Senate committees process inthe 2017 lame duck session. After a lengthy delay in the advertised start time,however, bill sponsors including Senate President Sweeney, Environment andEnergy Committee chair Smith circulated updated language including additionalelements aligned with Governor Murphy's anticipated environmental agenda. Atthis stage the updated bill text has yet to be posted and the sponsors were keento note that today was intended as a "warm-up" discussion. At the same time itwas stressed that the nuclear portion of the bill has been subjected to significantbriefing already and that it is consistent with a more environmentally-focusedlegislative agenda. Stakeholders were also reminded that the "nuclear-only" billhad moved through committees in both houses of the legislature late last year.( Jonathan Arnold) Utilities and Power

Euronav (EURN) - Q4 Wrap; Raising target price to $11Tgt USD10 to USD11.Euronav's Q4 results came in-line with low expectationsas the company worked to navigate the most difficult Q4 operating environmentsince 2012. Despite the weak rate environment, EURN continues to use its high-spec fleet and scale to outperform the broader market. Following delivery of thenewbuilds on order and the pending merger with Gener8 Maritime (GNRT), EURN


26 January 2018

DB Today - US

will become the undisputed market leader for crude tankers in 2018. Despitethe aggressive expansion, the company will maintain an LTV metric of about50% and a strong $750M liquidity position as this growth will be almost entirelyfunded with a combination of debt and equity, leaving the company with drypowder for future opportunities. While we expect rates will remain depressedthrough 1H’18 behind the supply over-hang, we note the market could tightenquicker than most suspect as the combination of low rates and high steel pricescould lead to accelerated scrapping. We are slightly adjusting our estimates toreflect the Q4 results and management outlook/commentary and now forecast2018 EBITDA of $257.9M (Consensus: $226M) and 2019 EBITDA of $425.1M(Consensus: $385M). EURN remains our top pick in the crude tanker sector andwe are raising our target price to $11 from $10, which is in line with the viewsexpressed in our recently published 2018 outlook report . Last Close USD9.1,Buy. ( Amit Mehrotra) EURN

Freeport-McMoRan (FCX) - Post-4Q17 update: Improving story but not cheapand not without risksTgt USD15 to USD16.Story simplifying, now it all comes down to the Grasbergdeal structure and valuation. Freeport reported 4Q17 production and financialnumbers mainly as expected and provided guidance for 2018 largely the sameas the numbers provided at the 3Q17 result. Importantly for the company, NetDebt continues to fall and is now at $8.7bn which on our numbers reaches$5.8bn by YE18. We like copper and assume $3.26/lb in 2018 based on improvingfundamentals but we would prefer to wait to see the final mechanism for a dealon Grasberg ownership before becoming more positive on the stock. We alsobelieve a favorable deal structure is already priced in. The company has guidedto resolution at Grasberg during 1H18. After adjusting for lower Net Debt thanwe had forecast and attributing higher value to the US business at Lone Star, ourNPV has increased from $15.2/sh to $15.9/sh. Our PT (1x NPV) is now $16/sh(previously $15/sh) and we maintain a Sell rating with 19% implied downside. Our2018/19 EBITDA forecasts are down 8%/14% based on slightly higher costs thanwe previously forecast and small changes to our production assumptions. Wecalculate 2018E attributable EV/EBITDA of 5.7x but due to declining production(at Grasberg) in 2019, this increases to 6.8x in 2019E using DBe $3.40/lb copper.Using spot copper ($3.15/lb), we forecast 2019E attributable EV/EBITDA of 7.9xand a 3.6% FCF yield. Last Close USD19.82, Sell. ( Chris Terry) FCX

Helmerich & Payne (HP) - Executing on market share planTgt USD52 to USD60. A clear and effective strategy. We are raising our fiscal2018 EBITDA estimate for Helmerich & Payne by 10% to $548m and our pricetarget to $60 from $52. For those seeking leverage to a strengthening oil price,higher rig counts and improved pricing, HP is the only major US land driller withan inventory of 100 idle rigs suitable for an upgrade to super-spec capabilities,which are trafficking at a utilization in the high-90s with leading edge dayrates inthe low-to-mid $20 kpd range. HP’s market share has increased by more than 600bps since its peak US rig count of 297 in its Dec-14 quarter. Currently at 22%, weexpect HP’s market share to rise to about 25% toward year-end 2018. Spot pricingsince its mid-November call has increased 4% with further increases expected bymanagement in 2018. Last Close USD73.69, Hold. ( David Havens) HP

RPC Inc (RES) - Utilization disruption hits EPSReducing 2018 EBITDA estimate to $589m from $651m. The down draft in 4Q17frac utilization experienced by RES will take till late in 1Q or early 2Q18 to restore.This prompts us to reduce our 1Q18 EPS to $0.30 from $0.35. Managementexpects pricing to be muted in 1Q18 (in the low single-digits), but expects it to


26 January 2018

DB Today - US

ramp higher in 2Q and 3Q18. Many have parroted a 10-15% inflation in 2018,which may be conservative. Assuming the mid-point of the 20-25% effective taxrate guidance, we are increasing our 2018 EPS to $1.53 from $1.45. However,operationally, the slower ramp through 1Q18 than we previously modeled reducesour 2018 EBITDA to $589m from $651m. Last Close USD21.36, Hold. ( DavidHavens) RES

TECHNOLOGY/MEDIA/TELECOM

8x8, Inc. (EGHT) - Growth ticks upTgt USD20 to USD22.Organizational changes showing results. 8x8’s resultsshowed modest acceleration in revenue growth after a bumpy start earlier inthe fiscal year. Management tone was markedly improved, although we didn’tget early guidance for FY19 (March). Revenue for the third fiscal quarter was$75.6m (up 19% y/y as reported or 18% y/y adjusted for discontinued ops and FX)and EPS of $0.02, versus estimates of $73.9m/$0.01, as midmarket/ enterprisemomentum continued (up +28% y/y), now ~59% of Services, up from 55% a yearago. Management nudged up the FY18 revenue guidance midpoint to $293.5mfrom $293m prior, as the company works through realignment of the salesorganization and extended enterprise deployment cycles. Management focusremains on accelerating growth (target 25% y/y exiting FY19). We maintain ourBuy rating and raise our PT to $22 from $20. Last Close USD16.1, Buy. ( NandanAmladi) EGHT

Alliance Data Systems (ADS) - Attractive Macro TailwindsRevenues disappoint but tax reform provides solid tailwinds going forward.Revenues came in below expectation again with challenges in BrandLoyalty andHurricane headwinds in the card business this quarter. However, ADS remainscomfortable with FY18 revenue guidance of $8.35bn (8% Y/Y) due to moderationof Hurricane headwinds (none post 1Q18), solid bookings in BrandLoyalty (80%of FY18 revenues booked), reacceleration in Epsilon revenues, and ramping-upof new wins in card services. More importantly, we believe the lower payrolltax deduction, increase in minimum wages, and special bonuses bode wellfor spending growth and credit. In addition, Card services business shouldalso benefit from a rising rate environment while retailers/corporates potentiallyincreasing their marketing spend in response to corporate tax reform could deliverupside to revenue growth. Valuation remains attractive trading under 10x CY19estimates with a potential for strategic optionality. Last Close USD252.85, Buy.( Ashish Sabadra) ADS

Avnet (AVT) - F2Q-18 results: raised outlook reflects signs of improvementTgt USD43 to USD645. EMEA and Asia continue to drive upside. AVT reportedbetter-than-expected F2Q-18 results and F3Q-18 guidance due to ongoingstrength in EMEA and Asia and easing headwinds from the Americas. Mgmtraised its outlook for FY-18 sales while pressure from mix and an elevated coststructure are expected to be a worse drag on OpMgn. We are encouraged bysigns of stabilization in the Americas and growth at Premier Farnell and believemgmt has done a good job absorbing the loss of $1B in sales. However, given theongoing headwinds to margins from sales mix, ERP spend, and new initiatives,we remain cautious on the pace of AVT's transformation. We continue to viewrisk/reward as balanced at current levels and maintain our Hold. Last CloseUSD42.99, Hold. ( Sherri Scribner) AVT

Crown Castle (CCI) - Triple Crown: Towers, small cells and fiber set CCI apartReiterating our Buy, given unique strategic positioning and estimate upside. Wecontinue to see Crown Castle as the best positioned play on accelerating US


26 January 2018

DB Today - US

Wireless spend. Crown Castle’s “asset trifecta” of ~40k macro sites (just shy ofAMT), ~50k small cells (deployed/under contract), and 60k fiber route miles (in23/25 top markets) makes it a key thematic idea benefitting from multiple networkinvestment catalysts in 2018 and beyond. Put another way, we think CCI’s uniqueasset mix could serve as a “swiss army knife” of sorts for carrier infrastructureneeds; these include LTE coverage enhancements, densification, and early 5Gbuilds. Given this backdrop, and as the US Wireless market rapidly approaches5G, the combination of traditional macro towers and fiber/small cells becomesincreasingly critical in our view. Last Close USD108.61, Buy. ( Matthew Niknam)CCI

Flex (FLEX) - F3Q-18 results: Momentum continues in an investment yearTgt USD17 to USD19. Stronger sales deliver upside. Flex's F3Q-18 results andF4Q-18 guidance were modestly ahead of expectations as stronger sales offsetsome of the cost pressure from new program ramps across the business.While we are encouraged that all four segments reported sequential OpMgnimprovement, we expect the aggressive pace of new program ramps to remaina modest headwind over the next few quarters. We were also impressed bythe continued strong performance in IEI and HRS as FLEX's business shifts tothese higher margin segments, although these positives were somewhat offsetby mgmt's comments of lower sales in the Nike business. We've modestly raisedour estimates and PT, but we continue to believe that risk/reward is fairly reflectedat current levels. Last Close USD18.81, Hold. ( Sherri Scribner) FLEX

KLA-Tencor Corporation (KLAC) - Outlook implies slower growth than peersTgt USD110 to USD115. Raising guidance, but likely not enough. KLAC delivereda solid quarter with upside to revenues and shipments. The company isguiding revenues to be slightly ahead of consensus for C1Q18 and CY2018.However, given LRCX's very strong guidance yesterday and investors have beenaccustomed to "beat and raise" for semicap equipment companies so far thisearnings season, KLAC's guidance will likely be viewed as "not good enough".That said, the benefits from the U.S. tax reform is larger than we expected, withthe company's tax rate declining from 20% to 15%, driving most of our upwardestimate revisions. We raise our estimates to reflect higher revs/GM and lower taxrate, but continue to view the stock as fairly valued at ~14x CY18E EPS, vs. LRCXat ~12x and AMAT at ~13x. Maintain Hold on KLAC. Last Close USD113.09,Hold. ( Sidney Ho) KLAC

Microsemi Corporation (MSCC) - F1Q18 Results: Steady delivery despite manymoving partsTgt USD63 to USD68. Microsemi continued its pattern of steady execution,delivering revenue growth and margins within its target topline/GM ranges(+6-8% y/y/60%), with an in-line report and guidance. Though the near-termimpact of Vectron weighs on MSCC's gross and operating margins, we see themid/long-term operating margin profile of the business closer to MSCC's corpaverages at >30%, which should begin to be more of a tailwind in FY19. However,this accretive impact is offset by a higher tax rate, which moves from 7.5% to10% in FY19, and thus keep our CY19 estimates unchanged. So, while thereare many moving parts to the MSCC story, the co's steady execution, combinedwith recent reports of potential M&A candidacy, leave us believing the sharesremain attractively valued. Maintain Buy rating and increase P/T to $68. LastClose USD61.73, Buy. ( Ross Seymore) MSCC

Teradyne (TER) - Target model and capital returns impressive, offset by cyclicalconcerns


26 January 2018

DB Today - US

Tgt USD44 to USD46. Solid multi-year outlook and capital returns, but risks innear term. TER delivered a solid 4Q beat driven by a strengthening Semi Testmarket. We are impressed with the new target 2021 operating model that yieldsan EPS of $3.50-$4.00, but also one that does not seem to be relying on stretchedassumptions. We are also delighted to see the company taking a big step-up incapital returns through a $1.5b repurchase program, converting its balance sheetinto earnings power. That said, we remain cautious with end market demandespecially as it relates to the smartphone market, and we also believe investorsmay not fully appreciate the risks of TER's potential share gain reversal in SoCtest. Overall, we believe the risk-reward is relatively balanced at the current level,and we maintain our Hold rating. Last Close USD44.8, Hold. ( Sidney Ho) TER

Western Digital (WDC) - F2Q-18 results: The NAND party rolls on, for nowTgt USD82 to USD90. Results driven by NAND and cloud demand upside.WDC reported upside to F2Q-18 results and higher F3Q-18 guidance, driven bycontinued strong NAND performance and an acceleration in demand for capacityenterprise HDDs from cloud service providers (CSPs). Mgmt continues to do agood job driving profitable growth, with F2Q-18 sales up 9% Y/Y and GMs ex-options up 7ppts Y/Y. Mgmt also revised its FY-18 EPS guidance up on the back ofstrong expected F2H-18 results, however, we don't see the results or the bullishguidance as a thesis changer. We continue to remain concerned as the NANDcycle rolls over into F1H-19 (C2H-18) and we would take a more wait-and-seeapproach to the name until there is more clarity on the NAND pricing environmentlater this year. With risk/reward balanced at current level, we remain on thesidelines. Last Close USD87.99, Hold. ( Sherri Scribner) WDC

MicroStrategy (MSTR) - All About a 2H18 RecoveryMixed 4Q17 Results/Call. MSTR posted slightly better-than-expected results, withall the key metrics beating our (albeit conservative) estimates. Highlights includeda 15% decline in product license revs (in-line with Qlik, better than Teradata), totalrevs down 1% (down 4% in c/c), non-GAAP OM of 16.3% (above our estimatebut down sharply from the year-ago 28.6% due to a ramp in spending and thetop-line weakness) and DR/billings showing no unusual weakness. Offsetting thebeat was a cautious tone about 1H18 growth and margins, implying that to ownthe stock here, investors need faith in a 2H18 recovery. We’re not seeing signsof a turn yet and hence we’re content to remain on the sidelines, reaffirming ourHOLD rating. Last Close USD137.33, Hold. ( Karl Keirstead) MSTR


26 January 2018

DB Today - US

GLOBAL RESEARCH

UK DOMESTIC BANKS - Lower margins but better capital distributionDavid Lock: UK domestic banks have enjoyed relatively stable net interestmargins and falling impairment rates in recent years, but limited capital return asbuffers were built, and PPI / litigation / restructuring costs mounted. We expectthis to change in 2018: asset pricing remains very competitive, liability pricing hasstarted to rise, and whilst we do not forecast a sudden rise in credit losses, weexpect LLPs have now troughed. But the margin dynamic will not affect banksuniversally, and with PPI past the worst we think FY18 will mark a turning pointfor capital return in the sector, with increased prospect of buybacks. We preferlarge UK domestics (Lloyds, Barclays: Buy) vs Challengers (CYBG: Sell).http://pull.db-gmresearch.com/p/534-65C7/92637000/0900b8c08e1475f5.pdf.

Figure 7: UK Domestic Banks


EUROPEAN EQUITY STRATEGY - After the defensives’ drop: time to re-engage?European defensives have underperformed cyclicals by 4% since the start of theyear, mainly driven by a drop in defensives, which underperformed the market by3%. Two thirds of defensives’ underperformance is accounted for by weaknessin the bond proxy sectors (food & beverages, personal & household goods, realestate and utilities). Following the latest moves, cyclicals versus defensives arenow around 10% above the level implied by the rise in the US 10-year bond yield(up around 20bps year-to-date). (Andreas Bruckner) Strategy

LUXURY GOODS - Living in The MatrixEUR strength a headwind for luxury...The recent strengthening of the EUR hasprompted us to analyze the resulting FX impact on the earnings of our luxuryuniverse. We calculate that excluding hedging or price actions there would be anaverage 80bps EBIT margin dilution at current spot rates versus the average ratesof 2017. However, our estimates are based on December spot rates, hence alreadyreflect part of this downside risk (c50bps of the c80bps) and are "only" exposedto a further 30bps margin dilution at current spot rates (4.5% negative EBITimpact). The critical factor is the difference in impact between sales and costs.Swatch stands out with the current most favorable FX mix while Richemont'sEUR headwinds are neutralized by a weak CHF. Hugo Boss, Tod's and Moncler arerelatively better positioned thanks to the natural hedge from the better alignmentof EUR costs with EUR revenues. (Dan Gianera) Luxury Goods

EUROPEAN UTILITIES - How to play the Fortum-Uniper combinationWe today published slide based analysis of Fortum and Uniper. We include anextract from the note highlighting our investment conclusions in today’s Idea ofthe Week. We believe investors should Buy Uniper (TP 26.5/share) and Sell Fortum(TP E15.5/share). In our view the significant differential in multiples between the


26 January 2018

DB Today - US

stocks, with Uniper trading on 10.4x 2020E P/E versus Fortum on 14.2x, is notjustified. (James Brand) Utilities

AIA (1299) - FY17 preview – Expect another solid yearTgt HKD75.80 to HKD76.50. AIA is due to report its FY17 results on 27 Feb 2018.We forecast 2017E EV of US$49,900mn (+18.5% yoy, or 7.8% hoh) and VNB ofUS$3,515mn (+27.8% yoy, 29.1% on constant exchange rate (CER)), driven byboth volume (ANP +17.1%) and margin (4.9ppt NB margin expansion to 57.7%).This implies 2H17E VNB growth of 18.2% yoy (same on CER) and 4Q17E growthof 17.1% yoy (16.7% onCER). We forecast LT operating profits after tax to growby 15.0% to US$4,578mn and net profits to increase by 39.3% to US$5,802mn.Overall, we expect a solid set of results. Maintain Buy. Last Close HKD66.35,Buy. (Esther Chwei)1299

SK HYNIX (000660) - Management confirms healthy industry outlook in 2018Seung Hoon Han: SK Hynix reported 4Q17 revenues and OP that were slightlyhigher than our forecasts. We believe the results support our view thatmemory supply may remain limited in 2018, as technology complexity andcapex requirements are significantly higher than in previous product cycles.Management indicated that EUV performance has not improved enough toachieve accelerated bit growth from technology migrations at 1Znm. We believestock valuation is attractive, with SK Hynix trading at 1.9X 2018 EV/EBITDA, 4.1X2018 P/E and 1.2X 2018 P/B (vs. ROE 33%). We raise our EPS forecast by 8%in 2018 due to better near-term ASP outlook and maintain our W106,400 TP;maintaining Buy. Last Close KRW75800, Buy.(Seung Hoon Han) 000660

Early Morning Reid - Macro StrategyIt may have made an assist but it’s not often that an ECB meeting getsovershadowed by a diplomatic - and somewhat confusing - war of words overcurrencies. Indeed, there will be plenty of people who will have to double-taketheir screens this morning after FX markets spun on their heels last night. Beforeyou do though a quick 121-word summary goes as follows. Yesterday morningin Davos US Treasury Secretary Steven Mnuchin reinforced his weaker dollarrhetoric. ECB President Mario Draghi then fired an unsubtle warning shot backto Mnuchin at the ECB press conference. The EUR/USD peaked at an intradayhigh of just over 1% at this stage. Then, after Europe went home, a Bloombergstory hit the screens suggesting that some ECB Governing Council members weresaid to favour waiting until June to start tweaking forward guidance. A matter ofminutes later, President Trump then announced his presence in Davos by sayingthat he wants to see a strong USD and that comments from Mnuchin were takenout of context. Six hours after starting the rally and EUR/USD was back to flat.(Jim Reid) Economics


26 January 2018

DB Today - US

Figure 8: US Macro Forecasts

Q2 Q3 Q4 Q1F Q2F Q4F

Real GDP (% q/q) 3.1 3.2 3.3 2.3 2.6 2.3

Core CPI (%y/y) 1.8 1.7 1.7 1.7 2.1 2.1

Unemployment rate (%) 4.3 4.3 4.1 4.0 3.9 3.7

Fed Funds (%) 1.125 1.125 1.375 1.625 1.875 2.375

S&P 500 EPS Forecasts & Targets

S&P 500 Forecasts P/E Multiple S&P Target

2015 $118 18.4 2043.9

2016E $118 18.4 2150.0

2017E $130 16.7 2350.0

Brett Ryan Senior US Economist 1-212-250-6294

Matthew Luzzetti Senior Economist 1-212-250-6161

2017 2018

Source: Note: Annual figures are Q4/Q4 for GDP, inflation and unemployment rate.Macro Forecasts data updated from US Economics Perspectives dated 24 Jan 2018Source: Deutsche Bank * *Compiled by DB US Economics team; may differ from official 10Yr yield forecasts from DB Fixed Income Strategy

Figure 9: Today's Market Data Item

Time (ET) Item Forecast Consensus

8:30 AM Real GDP (Adv. Q4 17): 3.30% 3.00%

GDP deflator: 2.50% 2.30%

8:30 AM Durable goods orders (Dec P): 0.50% 0.80%

Ex transportation: 1.00% 0.60%

Non-def cap goods ex aircraft: - 0.60%

8:30 AM Adv goods trade balance (Dec) -$68.0B -$68.9B

Source: Deutsche Bank, Bloomberg Finance LP

Figure 10: Today’s Company Meetings and Investor Field Trip

Company Meeting Location

None New York

Investor Field Trip

None


Figure 11: Corporate AccessUpcoming Conferences/Trips/Events

Date Conferences Location

5 - 8 February 2018 dbAccess India Macro and Corporate Day New Delhi, India

6 - 7 February 2018 dbAccess Philippines Corporate Day Hong Kong

8 - 9 February 2018 dbAccess Philippines Corporate Day Singapore

22 - 23 February 2018 dbAccess Indonesia Corporate Days London, UK

01 March 2018 Mid-Cap Banks Summit New York

Source: Deutsche Bank For more details log on to www.conferences.db.com


26 January 2018

DB Today - US

Figure 12: DAILY REVISIONS

Ticker Company Analyst Name Sector Change New Previous %Chg

CONSUMER

BIG.N Big Lots Inc (Buy, $62.14) Paul Trussell Multiline Retail Target Price Ÿ 70 60 16.7

EPS 2018 Q4 Ÿ 2.53 2.39 5.8

EPS 2018 FY Ÿ 4.41 4.27 3.2

EPS 2019 FY Ÿ 4.89 4.47 9.4

EPS 2018 FY ź 1.91 2.01 -5.1

DG.N Dollar General (Buy, $103.75) Paul Trussell Multiline Retail Target Price Ÿ 121 97 24.7

EPS 2018 Q4 Ÿ 1.49 1.46 2.3

EPS 2018 FY Ÿ 4.54 4.5 0.7

EPS 2019 FY Ÿ 5.82 5.1 14.3

EPS 2018 FY ź 4.15 4.25 -2.4

DLTR.OQ Dollar Tree Inc. (Buy, $115.07) Paul Trussell Multiline Retail Target Price Ÿ 137 108 26.9

EPS 2018 Q4 Ÿ 1.89 1.88 0.9

EPS 2018 FY Ÿ 4.87 4.86 0.3

EPS 2019 FY Ÿ 6.13 5.4 13.6

EPS 2019 FY Ÿ 4.23 3.62 16.8

MKC.N McCormick (Sell, $105.09) Rob Dickerson Food Products Target Price Ÿ 99 98 1

EPS 2018 Q1 Ÿ 0.91 0.89 2.1

EPS 2018 FY Ÿ 4.8 4.75 0.9

GS.N Goldman Sachs (Buy, $250.97) Matthew O'Connor Capital Markets Target Price Ÿ 281 255 10.2

NWL.N Newell Brands (Hold, $24.81) Stephen Powers Household Durables Target Price ź 23 33 -30.3

EPS 2017 Q4 ź 0.68 0.78 -12.5

EPS 2017 FY ź 2.75 2.84 -3.4

EPS 2018 FY ź 1.99 3.18 -37.3

KEY.N KeyCorp (Hold, $20.82) Matthew O'Connor Commercial Banks Target Price Ÿ 22 18 22.2

WMT.N Wal-Mart (Hold, $106.60) Paul Trussell Food & Staples Retailing Target Price Ÿ 102 88 15.9

EPS 2018 Q4 ź 1.3 1.34 -2.8

EPS 2018 FY ź 4.38 4.42 -0.9

EPS 2019 FY Ÿ 4.94 4.66 6.1

EPS 2011 FY Ÿ 0.93 0.92 1.4

FINANCIALS EPS 2012 FY Ÿ 0.86 0.85 0.9

AJG.N Arthur J. Gallagher (Hold, $65.65) Joshua Shanker Insurance Target Price Ÿ 69 65 6.2

EPS 2018 Q1 Ÿ 0.51 0.42 22.3

EPS 2018 FY Ÿ 3.59 3.26 10.1

EPS 2019 FY Ÿ 4.1 3.72 10.3

AHL.N Aspen Insurance (Hold, $41.30) Joshua Shanker Insurance Target Price ź 42 45 -6.7

EPS 2017 Q4 ź -3.46 0.76 -

EPS 2017 FY ź -6.9 -2.7 -

EPS 2018 FY ź 3.65 4 -8.8

MS.N Morgan Stanley (Buy, $55.84) Matthew O'Connor Capital Markets Target Price Ÿ 60 51 17.6

SLG.N SL Green Realty (Hold, $96.49) Vincent Chao, CFA Eq Real Estate Investment Trusts Target Price Ÿ 111 110 0.9

EPS 2018 FY Ÿ 1.98 1.58 26

EPS 2019 FY Ÿ 1.93 1.52 26.7

HEALTH CARE People's United Finan. (Hold, $19.43) Dave Rochester Thrifts & Mortgage Finance Target Price Ÿ 20 19 5.3

ABT.N Abbott Laboratories (Buy, $63.22) Kristen Stewart, CFA Health Care Equipment & Supplies Target Price Ÿ 71 62 14.5

EPS 2018 Q1 Ÿ 0.57 0.55 3

EPS 2018 FY Ÿ 2.85 2.82 0.9

EPS 2019 FY ź 3.18 3.28 -3.1

EPS 2018 Q1 Ÿ 2.64 2.55 3.2

BIIB.OQ Biogen (Buy, $353.74) Andrew Peters Biotechnology Target Price Ÿ 373 358 4.2

EPS 2018 Q1 NEW 5.96 N/A -

EPS 2018 FY Ÿ 24.96 24.63 1.3

EPS 2019 FY Ÿ 26.52 25.28 4.9

EPS 2019 FY ź 5.46 5.52 -1.2



26 January 2018

DB Today - US


Company Analyst Name Sector Change New Previous %Chg

Alaska Air Group, Inc. (Buy, $62.07) Michael Linenberg Airlines Target Price ź 75 89 -15.7

EPS 2017 Q4 Ÿ 0.83 0.82 1.5

EPS 2017 FY Ÿ 6.63 6.62 0.2

EPS 2018 FY ź 6.25 7.4 -15.6

American Airlines Group (Buy, $53.05) Michael Linenberg Airlines EPS 2017 Q4 Ÿ 0.95 0.9 5.8

EPS 2017 FY Ÿ 4.88 4.85 0.6

EPS 2018 FY Ÿ 5.5 5.45 0.9

Basic Energy Services Inc (Hold, $21.49) David Havens Energy Equipment & Services EPS 2017 Q4 ź -0.5 -0.3 -

EPS 2017 FY ź -2.17 -1.97 -

EPS 2018 FY Ÿ -0.13 -0.21 -

EPS 2018 FY Ÿ 4.32 4.31 0.2

Caterpillar (Hold, $169.37) Nicole DeBlase Machinery Target Price Ÿ 174 154 13

EPS 2018 FY Ÿ 9.16 7.92 15.6

EPS 2019 FY Ÿ 10.34 8.76 18

EPS 2018 FY Ÿ 2.25 2.08 8.1

Euronav (Buy, $9.10) Amit Mehrotra Oil,Gas & Consumable Fuels Target Price Ÿ 11 10 10

EPS 2018 Q1 NEW -0.22 N/A -

EPS 2018 FY ź -0.46 -0.31 -

EPS 2019 FY ź 0.19 0.27 -29.1

Ligand (Sell, $150.56) Esther Rajavelu Biotechnology Target Price Ÿ 112 105 6.7

Eversource Energy (Hold, $64.57) Caroline Bone - CFA Electric Utilities Target Price Ÿ 69 66 4.5

EPS 2018 FY Ÿ 5.83 3.77 54.7

Freeport-McMoRan (Sell, $19.82) Chris Terry Metals & Mining Target Price Ÿ 16 15 6.7

EPS 2018 Q1 ź 0.59 0.69 -14.5

EPS 2018 FY ź 2.32 2.48 -6.5

EPS 2019 FY ź 1.7 1.98 -14.2

Helmerich & Payne (Hold, $73.69) David Havens Energy Equipment & Services Target Price Ÿ 60 52 15.4

EPS 2018 Q2 Ÿ -0.08 -0.12 -

EPS 2018 FY Ÿ -0.13 -0.42 -

EPS 2019 FY Ÿ 0.37 0.06 551.3

Waters (Hold, $207.87) Dan Leonard Life Sciences Tools & Services Target Price Ÿ 211 200 5.5

Iron Mountain Inc. (Sell, $35.82) Kevin Mcveigh Eq Real Estate Investment Trusts Target Price ź 27 30 -10

EPS 2017 Q4 ź 0.28 0.3 -5.2

EPS 2017 FY ź 1.13 1.15 -1.3

EPS 2018 FY Ÿ 1.38 1.31 5.4

EPS 2018 FY ź 6.6 6.75 -2.2

JetBlue Airways Corp. (Buy, $20.69) Michael Linenberg Airlines Target Price ź 26 31 -16.1

EPS 2018 FY ź 2 2.35 -15.1



26 January 2018

DB Today - US


Ticker Company Analyst Name Sector Change New Previous %Chg

TECHNOLOGY/MEDIA/TELECOM

OSK.N Oshkosh Corp (Hold, $95.33) Nicole DeBlase Machinery Target Price Ÿ 99 90 10

EPS 2018 FY Ÿ 5.25 4.53 15.8

EPS 2019 FY Ÿ 5.67 5.02 13

RES.N RPC Inc (Hold, $21.36) David Havens Energy Equipment & Services EPS 2018 Q1 ź 0.3 0.35 -13.5

EPS 2018 FY Ÿ 1.53 1.45 5.5

EPS 2019 FY Ÿ 1.69 1.58 7

MSTR.OQ MicroStrategy (Hold, $138.85) Karl Keirstead Software EPS 2018 FY ź 1.94 1.99 -2.3

LUV.N Southwest Airlines Co. (Buy, $60.19) Michael Linenberg Airlines EPS 2017 FY Ÿ 3.5 3.48 0.4

URI.N United Rentals (Hold, $181.91) Nicole DeBlase Trading Companies & Distributors Target Price Ÿ 185 175 5.7

EPS 2018 Q1 Ÿ 2.71 2.23 21.2

EPS 2018 FY Ÿ 16.32 12.29 32.8

EPS 2019 FY Ÿ 17.11 13.14 30.2

TXN.OQ Texas Instruments (Hold, $116.41) Ross Seymore Semiconductors & Semiconductor Equipment Target Price Ÿ 105 92 14.1

EGHT.N 8x8, Inc. (Buy, $16.10) Nandan Amladi Software Target Price Ÿ 22 20 10

EPS 2018 FY Ÿ 0.07 0.06 9.9

EPS 2019 FY Ÿ 0.11 0.07 53

EPS 2018 Q4 Ÿ 0.57 0.53 8

ADS.N Alliance Data Systems (Buy, $252.85) Ashish Sabadra IT Services EPS 2018 Q1 ź 4.76 5.45 -12.7

EPS 2018 FY ź 22.64 24.06 -5.9

EPS 2019 FY ź 26 27.13 -4.2

AVT.N Avnet (Hold, $42.99) Adrienne Colby Electronic Equip & Instruments Target Price Ÿ 45 43 4.7

EPS 2018 Q3 Ÿ 0.96 0.83 15.4

EPS 2018 FY Ÿ 3.47 3.32 4.6

EPS 2019 FY Ÿ 3.85 3.72 3.6

CCI.N Crown Castle (Buy, $108.61) Matthew Niknam Wireless Telecommunication Services EPS 2017 FY ź 1.01 1.1 -8.3

EPS 2018 FY Ÿ 1.11 1.1 0.9

FLEX.OQ Flex (Hold, $18.81) Sherri Scribner Electronic Equip & Instruments Target Price Ÿ 19 17 11.8

EPS 2018 Q4 Ÿ 0.26 0.24 8.7

EPS 2018 FY Ÿ 0.96 0.93 2.8

EPS 2019 FY Ÿ 1.32 1.24 6.4

KLAC.OQ KLA-Tencor Corporation (Hold, $113.09) Sidney Ho Semiconductors & Semiconductor Equipment Target Price Ÿ 115 110 4.5

EPS 2018 Q3 Ÿ 1.97 1.79 10.2

EPS 2018 FY Ÿ 7.71 7.2 7.1

EPS 2019 FY Ÿ 8.31 7.55 10.1

MXIM.OQ Maxim Integrated (Buy, $55.12) Ross Seymore Semiconductors & Semiconductor Equipment Target Price Ÿ 65 60 8.3

EPS 2018 Q3 Ÿ 0.71 0.61 15.1

EPS 2018 FY Ÿ 2.7 2.51 7.6

EPS 2019 FY Ÿ 3.04 2.9 4.9

MSCC.OQ Microsemi Corporation (Buy, $61.73) Ross Seymore Semiconductors & Semiconductor Equipment Target Price Ÿ 68 63 7.9

EPS 2018 Q2 ź 0.78 0.88 -11.3

MSTR.OQ MicroStrategy (Hold, $137.33) Karl Keirstead Software EPS 2018 FY ź 1.91 1.94 -1.8

EPS 2019 FY ź 3.57 3.78 -5.7

TER.N Teradyne (Hold, $44.80) Sidney Ho Semiconductors & Semiconductor Equipment Target Price Ÿ 46 44 4.5

EPS 2018 Q1 Ÿ 0.42 0.37 12.1

EPS 2018 FY Ÿ 2.45 2.1 16.8

WDC.OQ Western Digital (Hold, $87.99) Sherri Scribner Technology Hware, Storage & Peripherals Target Price Ÿ 90 82 9.8

EPS 2018 Q3 Ÿ 2.98 2.71 9.9

EPS 2018 FY Ÿ 12.46 12.01 3.7

EPS 2019 FY ź 10.26 10.27 0



26 January 2018

DB Today - US

Figure 15: DB Daily (DB covered stocks only (25 January 2018)



26 January 2018

DB Today - US

Appendix 1

Important Disclosures

*Other information available upon request

Disclosure checklistCompany Ticker Recent price* Disclosure

Hengrui Medicine 600276.SS 77.19 (CNY) 26 Jan 2018 NA*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Otherinformation is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than theprimary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal"tabs. Investors are strongly encouraged to review this information before investing.

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition,the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendationor view in this report. Amy Tan, Tim Pierotti, Mairead Smith, Mark Braley

Equity Rating Key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holderreturn (TSR = percentage change in share price from currentprice to projected target price plus pro-jected dividend yield ) ,we recommend that investors buy the stock.Sell: Based on a current 12-month view of total share-holderreturn, we recommend that investors sell the stock.Hold: We take a neutral view on the stock 12-months out and,based on this time horizon, do not recommend either a Buyor Sell.

Newly issued research recommendations and target pricessupersede previously published research.


26 January 2018

DB Today - US

Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sourcesbelieved to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. Hyperlinks to third-party websites in this report are provided for reader convenience only. Deutsche Bank neither endorses the content noris responsible for the accuracy or security controls of those websites.??If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this report,or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche Bank mayact as principal for its own account or as agent for another person.??Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for itsown account or with customers, in a manner inconsistent with the views taken in this research report. Others withinDeutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those takenin this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linkedanalysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differfrom recommendations contained in others, whether as a result of differing time horizons, methodologies, perspectivesor otherwise. Deutsche Bank and/or its affiliates may also be holding debt or equity securities of the issuers it writeson. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investmentbanking, trading and principal trading revenues.??Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They donot necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank providesliquidity for buyers and sellers of securities issued by the companies it covers. Deutsche Bank research analysts sometimeshave shorter-term trade ideas that may be inconsistent with Deutsche Bank's existing longer-term ratings. Trade ideasfor equities can be found at the SOLAR link at http://gm.db.com. A SOLAR idea represents a high-conviction belief by ananalyst that a stock will outperform or underperform the market and/or a specified sector over a time frame of no less thantwo weeks and no more than six months. In addition to SOLAR ideas, analysts may occasionally discuss with our clients,and with Deutsche Bank salespersons and traders, trading strategies or ideas that reference catalysts or events that mayhave a near-term or medium-term impact on the market price of the securities discussed in this report, which impactmay be directionally counter to the analysts' current 12-month view of total return or investment return as describedherein. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereofif an opinion, forecast or estimate changes or becomes inaccurate. Coverage and the frequency of changes in marketconditions and in both general and company-specific economic prospects make it difficult to update research at definedintervals. Updates are at the sole discretion of the coverage analyst or of the Research Department Management, and themajority of reports are published at irregular intervals. This report is provided for informational purposes only and doesnot take into account the particular investment objectives, financial situations, or needs of individual clients. It is not anoffer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy.Target prices are inherently imprecise and a product of the analyst ’ s judgment. The financial instruments discussedin this report may not be suitable for all investors, and investors must make their own informed investment decisions.Prices and availability of financial instruments are subject to change without notice, and investment transactions can leadto losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency otherthan an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is notnecessarily indicative of future results. Performance calculations exclude transaction costs, unless otherwise indicated.Unless otherwise indicated, prices are current as of the end of the previous trading session and are sourced from localexchanges via Reuters, Bloomberg and other vendors. Data is also sourced from Deutsche Bank, subject companies, andother parties.??The Deutsche Bank Research Department is independent of other business divisions of the Bank. Details regardingorganizational arrangements and information barriers we have established to prevent and avoid conflicts of interest withrespect to our research are available on our website under Disclaimer, found on the Legal tab.??


26 January 2018

DB Today - US

Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promiseto pay fixed or variable interest rates. For an investor who is long fixed-rate instruments (thus receiving these cashflows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thuscause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, thehigher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among themost common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, clientsegmentation, regulation (including changes in assets holding limits for different types of investors), changes in taxpolicies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or liquidation ofpositions), and settlement issues related to local clearing houses are also important risk factors. The sensitivity of fixed-income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, toFX depreciation, or to specified interest rates – these are common in emerging markets. The index fixings may – byconstruction – lag or mis-measure the actual move in the underlying variables they are intended to track. The choice ofthe proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexedto a typically short-dated interest rate reference index) are exchanged for fixed coupons. Funding in a currency that differsfrom the currency in which coupons are denominated carries FX risk. Options on swaps (swaptions) the risks typical tooptions in addition to the risks related to rates movements.??Derivative transactions involve numerous risks including market, counterparty default and illiquidity risk. Theappropriateness of these products for use by investors depends on the investors' own circumstances, including theirtax position, their regulatory environment and the nature of their other assets and liabilities; as such, investors shouldtake expert legal and financial advice before entering into any transaction similar to or inspired by the contents of thispublication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of thehigh degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than theamount of funds initially deposited – up to theoretically unlimited losses. Trading in options involves risk and is notsuitable for all investors. Prior to buying or selling an option, investors must review the "Characteristics and Risks ofStandardized Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable toaccess the website, please contact your Deutsche Bank representative for a copy of this important document.??Participants in foreign exchange transactions may incur risks arising from several factors, including: (i) exchange rates canbe volatile and are subject to large fluctuations; (ii) the value of currencies may be affected by numerous market factors,including world and national economic, political and regulatory events, events in equity and debt markets and changes ininterest rates; and (iii) currencies may be subject to devaluation or government-imposed exchange controls, which couldaffect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of anunderlying security, effectively assume currency risk.??Deutsche Bank is not acting as a financial adviser, consultant or fiduciary to you or any of your agents with respect toany information provided in this report. Deutsche Bank does not provide investment, legal, tax or accounting advice, andis not acting as an impartial adviser. Information contained herein is being provided on the basis that the recipient willmake an independent assessment of the merits of any investment decision, and is not meant for retirement accounts orfor any specific person or account type. The information we provide is directed only to persons we believe to be financiallysophisticated, who are capable of evaluating investment risks independently, both in general and with regard to particulartransactions and investment strategies, and who understand that Deutsche Bank has financial interests in the offering ofits products and services. If this is not the case, or if you or your agent are an IRA or other retail investor receiving thisdirectly from us, we ask that you inform us immediately.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in theinvestor's home jurisdiction. Aside from within this report, important risk and conflict disclosures can also be found athttps://gm.db.com on each company ’ s research page and under the "Disclosures Lookup" and "Legal" tabs. Investorsare strongly encouraged to review this information before investing.

United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and SIPC.Analysts located outside of the United States are employed by non-US affiliates that are not subject to FINRA regulations,including those regarding contacts with issuer companies.??


26 January 2018

DB Today - US

Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporatedin the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized underGerman Banking Law and is subject to supervision by the European Central Bank and by BaFin, Germany ’ s FederalFinancial Supervisory Authority.??United Kingdom: Approved and/or distributed by Deutsche Bank AG acting through its London Branch at WinchesterHouse, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by thePrudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and FinancialConduct Authority. Details about the extent of our authorisation and regulation are available on request.??Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch or Deutsche Securities Asia Limited (save that anyresearch relating to futures contracts within the meaning of the Hong Kong Securities and Futures Ordinance Cap. 571shall be distributed solely by Deutsche Securities Asia Limited). The provisions set out above in the "Additional Information"section shall apply to the fullest extent permissible by local laws and regulations, including without limitation the Code ofConduct for Persons Licensed or Registered with the Securities and Futures Commission. .??India: Prepared by Deutsche Equities India Private Limited (DEIPL) having CIN: U65990MH2002PTC137431 and registeredoffice at 14th Floor, The Capital, C-70, G Block, Bandra Kurla Complex Mumbai (India) 400051. Tel: + 91 22 71804444. It is registered by the Securities and Exchange Board of India (SEBI) as a Stock broker bearing registrationnos.: NSE (Capital Market Segment) - INB231196834, NSE (F&O Segment) INF231196834, NSE (Currency DerivativesSegment) INE231196834, BSE (Capital Market Segment) INB011196830; Merchant Banker bearing SEBI Registrationno.: INM000010833 and Research Analyst bearing SEBI Registration no.: INH000001741. DEIPL may have receivedadministrative warnings from the SEBI for breaches of Indian regulations. The transmission of research through DEIPLis Deutsche Bank's determination and will not make a recipient a client of DEIPL. Deutsche Bank and/or its affiliate(s)may have debt holdings or positions in the subject company. With regard to information on associates, please refer to the“Shareholdings” section in the Annual Report at: https://www.db.com/ir/en/annual-reports.htm.??Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number - Registered as a financialinstruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA, TypeII Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks involvedin stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying thetransaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a resultof share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming fromforeign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice,products and services. Recommended investment strategies, products and services carry the risk of losses to principaland other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Beforedeciding on the purchase of financial products and/or services, customers should carefully read the relevant disclosures,prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are notregistered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity.Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Group's analysts withthe coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed accordingto the Financial Instruments and Exchange Law of Japan. Target prices set by Deutsche Bank's equity analysts are basedon a 12-month forecast period..??Korea: Distributed by Deutsche Securities Korea Co.??South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch RegisterNumber in South Africa: 1998/003298/10).??Singapore: This report is issued by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, SingaporeBranch (One Raffles Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respectof any matters arising from, or in connection with, this report. Where this report is issued or promulgated by DeutscheBank in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in theapplicable Singapore laws and regulations), they accept legal responsibility to such person for its contents.??


26 January 2018

DB Today - US

Taiwan: Information on securities/investments that trade in Taiwan is for your reference only. Readers shouldindependently evaluate investment risks and are solely responsible for their investment decisions. Deutsche Bank researchmay not be distributed to the Taiwan public media or quoted or used by the Taiwan public media without written consent.Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to beconstrued as a recommendation to trade in such securities/instruments. Deutsche Securities Asia Limited, Taipei Branchmay not execute transactions for clients in these securities/instruments.??Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial CentreRegulatory Authority. Deutsche Bank AG - QFC Branch may undertake only the financial services activities that fall withinthe scope of its existing QFCRA license. Its principal place of business in the QFC: Qatar Financial Centre, Tower, WestBay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financialproducts or services are only available only to Business Customers, as defined by the Qatar Financial Centre RegulatoryAuthority.??Russia: The information, interpretation and opinions submitted herein are not in the context of, and do not constitute, anyappraisal or evaluation activity requiring a license in the Russian Federation.

Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company (registered no. 07073-37) is regulated by theCapital Market Authority. Deutsche Securities Saudi Arabia may undertake only the financial services activities that fallwithin the scope of its existing CMA license. Its principal place of business in Saudi Arabia: King Fahad Road, Al OlayaDistrict, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.??United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulatedby the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may undertake only the financial servicesactivities that fall within the scope of its existing DFSA license. Its principal place of business in the DIFC: DubaiInternational Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has beendistributed by Deutsche Bank AG. Related financial products or services are available only to Professional Clients, asdefined by the Dubai Financial Services Authority.??Australia and New Zealand: This research is intended only for "wholesale clients" within the meaning of theAustralian Corporations Act and New Zealand Financial Advisors Act, respectively. Please refer to Australia-specificresearch disclosures and related information at https://australia.db.com/australia/content/research-information.htmlWhere research refers to any particular financial product recipients of the research should consider any product disclosurestatement, prospectus or other applicable disclosure document before making any decision about whether to acquirethe product.??Additional information relative to securities, other financial products or issuers discussed in this report is available uponrequest. This report may not be reproduced, distributed or published without Deutsche Bank's prior written consent.Copyright © 2018 Deutsche Bank AG


David Folkerts-LandauGroup Chief Economist and Global Head of Research

Raj HindochaGlobal Chief Operating Officer

Research

Michael SpencerHead of APAC Research

Global Head of Economics

Steve PollardHead of Americas Research

Global Head of Equity Research

Anthony KlarmanGlobal Head ofDebt Research

Paul ReynoldsHead of EMEA

Equity Research

Dave ClarkHead of APAC

Equity Research

Pam FinelliGlobal Head of

Equity Derivatives Research

Andreas NeubauerHead of Research - Germany

Spyros MesomerisGlobal Head of Quantitative

and QIS Research

International Production Locations

Deutsche Bank AGDeutsche Bank PlaceLevel 16Corner of Hunter & Phillip StreetsSydney, NSW 2000AustraliaTel: (61) 2 8258 1234

Deutsche Bank AGMainzer Landstrasse 11-1760329 Frankfurt am MainGermanyTel: (49) 69 910 00

Deutsche Bank AGFiliale HongkongInternational Commerce Centre,1 Austin Road West,Kowloon,Hong KongTel: (852) 2203 8888

Deutsche Securities Inc.2-11-1 NagatachoSanno Park TowerChiyoda-ku, Tokyo 100-6171JapanTel: (81) 3 5156 6770

Deutsche Bank AG London1 Great Winchester StreetLondon EC2N 2EQUnited KingdomTel: (44) 20 7545 8000

Deutsche Bank Securities Inc.60 Wall StreetNew York, NY 10005United States of AmericaTel: (1) 212 250 2500

26 january 2018 markets research db today - us deutsche...

Documents