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KEY ECONOMICS EVENTS ICSC/GS Report ww for w/e 04/20 Redbook mm for w/e 04/20 Markit manufacturing PMI for Apr-Flash FHFA home price mm for Feb New Home Sales for Mar Rich Fed manufacturing for Apr Richmond manufacturing shipments Richmond Services revenue ET/GMT 0745/1145 0855/1255 0858/1258 0900/1300 1000/1400 1000/1400 1000/1400 1000/1400

North American Edition

REUTERS POLL --54.0 -0.420 mln ---PRIOR -1.1 pct -2.7 pct 54.6 0.6 pct 0.411 mln 3 8 4 SOURCE

For Tuesday, April 23, 2013

International Council of Shopping Centers/Goldman Sachs Redbook Research

Census Bureau (Dept. of Commerce) Federal Reserve Bank of Richmond

Stocks edged higher on Monday, supported by technology shares and encouraging results. Treasury prices edged up. The dollar fell against the yen, but remained near the key 100 level. Oil and gold rose.

Apple reports quarterly results at a time when the market believes
the company appears to be losing a once vice-like grip on its supply chain and on Wall Street. Suppliers and investors are struggling to gauge demand for the iconic iPhone as Samsung and up-and-coming rivals grab market share. Listen for any indication of what Apple plans to do with its $117 billion cash pile, which investors want more of. Separately, AT&T posts earnings for the quarter and the focus will be on its wireless margins and subscriber figures.

STOCKS DJIA Nasdaq S&P 500 Toronto Russell FTSE Eurofirst Nikkei Hang Seng

Close 14567.25 3233.55 1562.47 12090.68 914.76 6280.62 1155.00 13568.37 22044.37 Yield 1.6963 0.2298 0.6919 2.8778

Change 19.74 27.50 7.22 25.13 2.26 -5.97 1.81 251.89 30.80

% Chng 0.14 0.86 0.46 0.21 0.25 -0.09 0.16 1.89 0.14

Yr-high 14887.50 3306.95 1597.35 12904.71 954.00 6533.99 1209.05 13568.25 23944.74

Yr-low 12035.10 2726.68 1266.74 11209.55 729.75 5897.81 1132.73 10398.61 21423.25

Lockheed Martin, the largest U.S. defense contractor, is expected

to report a drop in revenues and a slight decline in earnings when it announces first-quarter results. Lockheed will be the first major weapons maker to announce results after across-the-board budget cuts took effect on March 1.

Delta Air Lines is likely to report a profit for the first quarter, which
would represent its first March quarter in the black since 2000, aided by corporate market share gains and better European performance. Also look for results from US Airways, which is expected to also report a first-quarter profit against a year-ago loss. Both airlines have noted that sequestration stalled some demand in March.

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

Price FOREX 3 /32 Euro/Dollar 0 /32 Dollar/Yen 2 /32 Sterling/Dollar 4 /32 Dollar/CAD Price 88.81 1424.54 3.1320 283.30 Price 73.89 1.16 0.38 4.84

Last % Chng 1.3059 99.28 1.5282 1.0261 -0.16 -0.49 0.33 0.06

Amgen, the world's largest biotechnology company, is expected to

report higher profit and revenue for the first quarter and possibly a turnaround in sales of its anemia drug Aranesp after a rival medicine was pulled from the market over safety concerns.

$ change 0.75 20.69 -0.0195 -0.39 $ change 5.51 0.08 -0.02 -0.26

% change 0.85 1.47 -0.62 -0.14 % change 8.06 7.41 -6.10 -5.10

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

DuPont posts quarterly results, its first since settling a multibilliondollar lawsuit with rival Monsanto that eased shareholder concerns about the company's agricultural unit.

Lululemon Athletica Cell Therapeutics Zoom Technologies Federal-Mogul

Diversified U.S. manufacturer United Technologies is expected to

post a jump in quarterly profit, helped by sales of elevators, air conditioners and jet engines.

Chesapeake Energy and its bond trustee Bank of New York Mellon are set to square off in a trial over the energy company's effort to redeem $1.3 billion in notes early. Chesapeake believed it had until March 15 to notify noteholders of its intention to redeem the notes, but investors who own roughly $250 million of the notes argue the company had to redeem the notes by March 15. The company owes them an additional $400 million make-whole payment for any redemption that occurs after March 15, they argue.

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For April 23, 2013

COMING UP (continued)
Travelers is the first major insurer to report first-quarter results, and the market will watch to see if the company continued its trend of increasing premium rates across its businesses. The insurer, which is a Dow Jones industrial average component, will also look to address questions on its ability to retain customers.

Coach reports quarterly results for the first time since the
overhaul of its stores and a bigger push into apparel and shoes began, with Wall Street keen to see if shoppers are taking to it, which would allow Coach to narrow the gap with Michael Kors. The leather goods maker has struggled with same-store sales in North America, still its biggest market, and an improvement on that front is likely to give shares a lift.

Norfolk Southern, the third-largest U.S. public railroad company, is expected to post strong quarterly results as steadying coal prices and a rise in surface transport helped, as more people and companies chose rails over air freight.

CIT Group, the small business lender led by former Merrill

Lynch Chief Executive John Thain, is expected to report solid profit as it continues to cut its high-cost debt after emerging from bankruptcy protection three years ago.

Look for a quarterly report from Illinois Tool Works, the diversified manufacturer that lost its longtime CEO to cancer late last year. ITW has warned investors it expects sales to grow modestly in 2013, by just 1 to 3 percent. But it has promised to grow earnings by double digits by restructuring its notoriously sprawling business and reducing the number of independent units to around 150 from nearly 800.

Canada's biggest natural gas producer Encana reports quarterly earnings. The company may update investors on its search for a new chief executive following the sudden departure of Randy Eresman earlier this year.

Also expect quarterly results from Xerox, Forest Laboratories, Gannett, Yum Brands, United Technologies and VM Ware.

Steelmaker AK Steel is expected to report its third straight

quarterly loss as demand for its products continued to remain weak. While the company expects a smaller sequential loss on higher prices, analysts indicated that recovery in pricing is not possible.

Wells Fargo will hold its annual shareholder meeting. Last

year's gathering was disrupted by demonstrators angered over foreclosure practices and other issues.

Stocks climbed on Monday, led by gains in the Nasdaq after reports that activist investor ValueAct Capital took a $2 billion stake in Microsoft, while a jump in the shares of Caterpillar helped buoy the Dow industrials. Microsoft gained 3.6 percent. Caterpillar's stock gained 2.8 percent and Halliburton rose 5.5 percent. "Ultimately, we think cyclical names will lead the market higher, but in the short term, the (recent) decline could continue," said Eric Green, senior portfolio manager at Penn Capital Management, who said that cyclical stocks were oversold. The Dow was up 0.13 percent, the S&P 500 Index was up 0.46 percent and the Nasdaq was up 0.86 percent. Government debt prices edged up on news of weaker-thanexpected home resales in March and the implications of waning inflation. "We already had a tremendous move in rates in the last few weeks," Newedge's Van Batenburg said. "We will probably grind to new lows for the year but it will take some time," he said. The U.S. central bank bought $3.728 billion in Treasuries that mature in January 2019 to March 2020. The benchmark 10 -year Treasury notes were 3/32 higher, yielding 1.70 percent. The 30-year bond rose 4/32 to yield 2.88 percent. The dollar slipped against the yen but remained within a hair's breadth of the key 100 level after major industrialized nations gave a stamp of approval to a massive Japanese easing program, which has eroded the currency. The dollar last traded at 99.27 yen, down 0.50 percent on the day. "The lack of pushback by the G20 effectively gives the BOJ room to ease further if needed and should keep the yen biased broadly lower," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange, Inc, in Washington, DC. The euro last traded at $1.3060, down 0.15 percent on the day. Click on the chart for full-size image

The May U.S. crude contract, which expires Monday, was up 0.85 percent to $88.81 a barrel. The crude for June delivery was up 1.19 percent to $89.32 a barrel. "The oil market is just trying to settle out, and to see whether the corrective action we saw late last week and this morning is going to continue," said Andy Lebow, senior vice president for energy at Jefferies Bache in New York. "The question is whether this downtrend we've been in since the first of April is going to break or brake." Gold rose closed up 1.5 percent, cutting gains late in the session but remaining supported by strong physical buying, after the price hit a two-year low last week. The technical outlook for gold, which is down more than 15 percent this year, has yet to improve despite the physical buying in Asia and elsewhere. Spot gold rose 1.53 percent to $1,425.26 per ounce. U.S. gold futures for June delivery was $1,425.50, up 2.13 percent.


For April 23, 2013

Caterpillar profit misses, cuts outlook on weak mining Caterpillar posted disappointing quarterly results and cut its 2013 profit forecast to reflect a drop in demand for heavy equipment from its mining customers. But Chairman and CEO Doug Oberhelman said the mining sector has hit bottom and production was expected to ramp up in the second quarter, based on lower inventories in China and the United States. The company said it now expects to report a 2013 profit of $7 per share on sales of $57 billion to $61 billion. The company earned a profit of $880 million, or $1.31 a share, down from $1.59 billion, or $2.37 a share, in the year-ago quarter. Sales during the period fell 17 percent to $13.20 billion. Caterpillar also said that it would resume a share buyback for the first time in five years. Existing home sales edge down, prices rise U.S. home resales edged downward in March, pointing to some slowdown in the housing market recovery pace as overall economic activity cools. The National Association of Realtors said existing home sales slipped 0.6 percent last month to a seasonally adjusted annual rate of 4.92 million units. Sales in March were 10.3 percent higher than the same month last year, and the median price for a home resale was up 11.8 percent, the biggest increase since November 2005, to $184,300. The data added to other reports such as employment and factory activity suggesting a loss of momentum in the economy as the first quarter ended. The supply of existing homes on the market for sale rose 1.6 percent during the month to 1.93 million, which represented 4.7 months' supply at March's sales pace, up from 4.6 in February. Halliburton in Gulf spill settlement talks, takes charge Halliburton is in talks to settle private claims against it in a trial to determine how to allocate blame for the 2010 Gulf of Mexico spill, the oilfield services company said, as it took a $1 billion pretax charge for a possible deal. Halliburton CEO David Lesar said the charge is based on where Halliburton is in the negotiations. It is on top of a first-quarter 2012 charge of $191 million after taxes, or $300 million before taxes. The company reported a loss of $13 million, or 1 cent per share, compared with yearearlier earnings of $635 million, or 69 cents per share. Excluding the charge and other items, it made a profit of 62 cents per share, ahead of the 57 cents that analysts expected. Revenue rose 1.5 percent to $6.97 billion. ECB policymakers hint at possible interest rate cut Comments by European Central Bank policymakers stressing falling inflation and poor growth prospects in the euro zone suggest the ECB may be leaning towards a further cut in its main refinancing rate. ECB Vice-President Vitor Constancio said inflation had fallen "rather significantly" and a rate cut was "always a possibility", but Governing Council member Klaas Knot said the ECB had "little ammunition left" and should use it carefully. The ECB left rates at a record low of 0.75 percent in April, but ECB President Mario Draghi said after its monthly policy meeting that the bank would "monitor very closely" all data and stand "ready to act" to boost the recession-hit euro zone. But the bank believes another cut would have only limited impact because its ultra-low interest rates do not reach all economies in the currency bloc evenly, with lenders in crisis countries passing on higher funding costs to their consumers. A rate cut would have symbolic importance, however, signalling that the ECB is ready to support the economy. Click on the chart for full-size image

Dreamliner set to fly in a week as Boeing fixes battery Boeing began installing reinforced lithium-ion batteries on five grounded 787 jets in Japan, starting a process that should make the first commercial Dreamliners ready to fly again in about a week. Boeing's Dreamliners have been grounded since regulators in the United States and elsewhere ordered all 50 planes out of the skies in mid-January after batteries on two of them overheated. U.S. regulators approved a new battery design on Friday. The grounding has cost Boeing an estimated $600 million, halted deliveries and forced some airlines to lease alternative aircraft. Several airlines have said they will seek compensation from Boeing, potentially adding to the plane maker's losses. ValueAct takes $2 billion Microsoft stake Activist investor ValueAct Capital has taken a $2 billion stake in Microsoft, CNBC reported, helping Microsoft shares climb to a seven-month high. CNBC's David Faber reported the stake. At Friday's closing price, a $2 billion stake would represent about 67.2 million Microsoft shares. That represents less than 1 percent of Microsoft but would be enough to make ValueAct a top15 investor in the company, based on Thomson Reuters data. ValueAct describes its management as being experts in "sourcing investments in companies they believe to be fundamentally undervalued, and then working with management and the company's board to implement strategies that generate superior returns on invested capital." Google defends UK tax payments, says good for country Google executive chairman Eric Schmidt has defended his company's low tax payments in Britain, saying the company follows the letter of the law and makes a positive contribution to the British economy. A British parliamentary committee last year accused Google, Inc and Starbucks Corp of "immorally" minimising their tax bills. Schmidt rejected the criticism in a radio interview with Britain's BBC. "I think the most important thing to say about our taxes is that we fully comply with the law and we'll obviously, should the law change, we'll comply with that as well," he said. In a response to public anger over the issue, the British government is leading an international push to reduce profit-shifting by international companies. Meanwhile, a German privacy regulator has fined Google for illegally recording signals from Wifi networks while it was taking photographs for its Street View service.


For April 23, 2013

TOP NEWS (continued)

News Corp, shareholders agree to phone hacking settlement News Corp will receive $139 million worth of insurance proceeds in a rare cash settlement that resolves a lawsuit by shareholders alleging the board failed to investigate the company's phone hacking scandal. The $139 million, which will be paid by the liability insurance for the board members, is the largest cash settlement in such a derivative case, according to one of the plaintiff's attorneys. As part of the deal, News Corp said it would adopt enhanced corporate governance procedures, including a policy to disclose to its shareholders political contributions made directly by the company. "We are pleased to have resolved this matter," News Corp said in a statement. Sprint forms committee, hires advisers to review Dish bid Sprint Nextel said that its board had formed a special committee of independent directors to review Dish Network's $25.5 billion takeover bid for the No. 3 U.S. mobile provider. The committee, which will be chaired by director Larry Glasscock, hired BofA Merrill Lynch as its financial adviser and Shearman & Sterling LLP a its legal counsel. Other Sprint special committee members include James Hance, V. Janet Hill, William Nuti and Rodney O' Neal. ABB bets on solar power with $1 bln takeover Swiss industrial group ABB is to buy U.S. solar energy company Power-One for about $1 billion, betting that growth in emerging markets will revive a sector ravaged by overcapacity and weakening demand in recession-hit Europe. The world's biggest supplier of industrial motors and power grids said it had agreed to

Zhang Bin, a Chinese People's Liberation Army soldier, carries a 60year-old survivor as he runs down a stretch of the road to Lingguan township which was recently cleared of debris from landslides caused by Saturday's earthquake, in Baoxing county in Ya'an, Sichuan province, China.

pay $6.35 per share in cash for Power-One. The offer price is 57 percent above Power-One's closing price on Friday, boosted by $266 million in net cash held by debt-free Power-One. Stripping out its cash pile, Power-One's enterprise value stands at $762 million, valuing the bid at a more modest 6.4 times 2012 core earnings.

Company Name Apple General Electric Honeywell International Business Machines Union Pacific Action BMO Capital cut target price to $440 from $460 on lowered mix assumptions and uncertainty around the June quarter. Nomura cut price target to $23 from $24 after the company posted lower-than-expected first-quarter results. Nomura raised target price to $85 from $77 on the company's strong execution given the low volume environment. SocGen cut target price to $203 from $211, citing the company's disappointing first-quarter results. Morgan Stanley raised price target to $157 from $155 after the company posted better-than-expected quarterly results, expects positive growth for FY2013.


Canadian retail data out on Tuesday is expected to show the
pace of sales growth slowed to 0.3 percent in February from 1.0 percent a month earlier. This would reinforce the market view that the Canadian economy has hit a slow patch and interest rates are unlikely to increase for a long time.

For April 23, 2013

Teck Resources is due to report its first quarter results. Analysts expect a profit of 44 Canadian cents per share, compared to a profit of 86 Canadian cents a share in the year-ago quarter. Investors will be looking for updates on the company's promising copper development projects, including the environmental impact study for its Quebrada Blanca Phase 2 project in Chile.

Bank of Canada Governor Mark Carney and Senior Deputy

Governor Tiff Macklem testify before a House of Commons committee about a monetary policy report released last week that lowered domestic growth forecasts but still insisted that rock-bottom interest rates will rise one day.

Celestica is due to report its first quarter results. Analysts expect a profit of 15 cents per share, compared to a profit of 20 cents a share, a year earlier. For the first time in over three years, Celestica's quarterly result will exclude revenue from Blackberry, whose exit cost the company between $55 million and $65 million in restructuring.

Canada's biggest natural gas producer Encana is expected to

report its first quarter results. Analysts forecast a profit of 3 cents per share. The company may also update investors on its search for a new chief executive following the sudden departure of Randy Eresman earlier this year.

TransAlta is expected to report its first quarter results. Analysts expect the company to earn 20 Canadian cents per share on revenue of C$595.5 million.

Canada's main stock index advanced on Monday, extending its gains to a third straight session as strength in commodity prices lifted shares of gold and energy companies. The Toronto Stock Exchange's S&P/TSX composite index was up 0.19 percent at 12,088.44. Goldcorp added 2.55 percent and Eldorado Gold was up 5.40 percent. The Canadian dollar was up 0.04 percent at $1.0259.
BIG MOVERS Aquila Resources Centerra Gold Lululemon Athletica Air Canada Romarco Minerals Niko Resources Price 0.12 4.17 75.96 2.62 0.46 6.17 C$ 0.02 0.52 5.76 -0.38 -0.05 -0.16 % Change 20.00 14.25 8.21 -12.67 -9.00 -2.53

Air Canada sees wider operating loss, shares tumble Air Canada said it expects to post a wider first-quarter operating loss, due to weather-related flight cancellations, operational challenges at its main airport hubs and an impairment charge, sending its shares tumbling. Announcing preliminary results ahead of schedule, so it could share the information with lenders in talks on financing options, heavily indebted Air Canada said it expects an operating loss of C$106 million in the quarter, wider than the year-ago loss of C$91 million. Air Canada expects its first-quarter net loss to narrow to about C$260 million from C$274 million a year earlier. The carrier also forecast an adjusted loss of about C$143 million, down from a loss of C$162 million in the first quarter of 2012. Barrick puts Australian gold mines up for sale Barrick Gold, battling heavy debt and a slump in gold prices, has put three mines in Western Australia up for sale, a person familiar with the process said. The world's top gold producer has appointed Bank of America's Merrill Lynch and UBS to advise on the sale of its Yilgarn South group of mines -- Darlot, Granny Smith and Lawlers -- which last year produced 452,000 ounces of gold. Total cash costs at the mines were $768 an ounce last year, according to Barrick's website. EU-Canada trade talks stalled, overshadowed by U.S. Talks to wrap up a multi-billion-dollar free trade deal between Canada and Europe have stalled, diplomats said, raising concerns the agreement could be put on hold as Brussels switches its attention to a much bigger pact with the United States. Diplomats and officials told Reuters wrangling over the amount of beef Canada will be able to export to the EU, and EU demands for greater ability to bid for Canadian government contracts, are bedevilling the final stages of the agreement. "This was supposed to be done in November, then we said February, but now there's no clarity ... No one wants to walk away from this, but it could be put on ice if things remain stuck for a prolonged period," said an EU diplomat.


For April 23, 2013


Apple's dimming luster roils suppliers, investors By Reiji Murai and Clare Jim Apple Inc marketing chief Phil Schiller let slip during last August's courtroom battle with Samsung that when setting forecasts for new iPhones, the inside joke was that people should assume sales would equal all previous versions combined. That quip, uttered in front of Samsung Electronics Co Ltd's trial lawyers and the media, no longer rings true as Apple appears to be losing a once vice-like grip on its supply chain and Wall Street. Suppliers and investors are struggling to gauge demand for the iconic smartphone as Samsung and up-and-coming rivals grab market share. Indications of reduced shipments now send shares in Apple and its component-makers into a tailspin. And criticism that innovation has stalled after the death of its legendary co-founder Steve Jobs 18 months ago is hurting sentiment in a stock that closed the week below $400 for the first time since December 2011. Sources at several Asian suppliers, which for years basked in the glow of Apple's success and enjoyed stock gains even on rumors they might be among the select group of companies to sell components to Apple, told Reuters last week about evermoving deadlines and said they were trying to reduce their reliance on the company. An Apple supply chain source in Japan said those in the industry often jokingly refer to the company as "Poison Apple" because of its hard-to-meet high standards and low price expectations. "'Apple can do no wrong' can only work until Apple does wrong," said Roger Kay, president of researcher and consultant Endpoint Technologies Associates. "It's like the rubber band effect. The more you stretch it, the more snap you get coming back." Apple reports quarterly results on Tuesday and declined to comment for this story. It has consistently said it focuses on making the best products - its iPhones remain the industry gold standard - and avoids discussing product strategy. CEO Tim Cook stressed on the last quarterly earnings conference call that it is difficult to paint a complete picture of its production process from "a few data points." Supplier sources in Japan and Taiwan, home to dozens of Apple suppliers, said they initially expected mass-production of the next iPhone to begin in June. That date may have begun to slip beyond June, the sources said. The phone, widely referred to as the iPhone 5S, is expected to include new features such as a fingerprint sensor. A supply chain source in Taiwan said Apple was trying to find a coating material that did not interfere with the fingerprint sensor, and this may be causing a delay. In addition to the 5S, suppliers say Apple is also developing a cheaper model, which can appeal to lower-income buyers in growth markets such as China and India. A supplier source in Japan told Reuters small-scale production of display panels will begin in May, ramping up to mass production in June. Both phones will use the same 4-inch screen, but the cheaper version will probably not include the new fingerprint technology and sport a cheaper plastic casing, the sources said. SPECULATE AT WILL Wild rumors plague every new iPhone launch. But this year much of the blogger and industry speculation has centered on whether demand for the iPhone is waning as an increasing number of consumers choose alternatives, including phones from Samsung - now the world's biggest seller of cell phones - and those produced by other adopters of Google Inc's Android software. Apple, the former darling of Main and Wall Street, rode a sevenfold increase in its stock price in the four years to September 2012. So Apple fans watched with increasing consternation as the shares fell 44 percent since then, shedding some $280 billion in market value along the way. That fall was mirrored in the smartphone arena. In 2012, Samsung became No.1 in the global market with a 30.3 percent share, knocking off Apple - which had a 19.1 percent share partly by flooding the market with cheaper devices. For the fourth quarter, Apple's share of the global smartphone market fell to 21.8 percent from 23 percent a year earlier, according to research firm IDC. The erosion of Apple's industry and market supremacy over the past year may embolden carrier partners and suppliers, analysts say. That could mean tougher negotiations over component costs and the subsidies carriers pay to stock iPhones. To be sure, Apple had a record 2012 in sales and profit. Its iPads lead the tablet market, and its Mac computers continue to outperform in a shrinking PC market. Analysts also say slowing growth is inevitable for a company its size. But its recent stock-market descent has unnerved many investors struggling to get a read on what Apple's numbers could look like on Tuesday - just days away from when Samsung begins selling a new Galaxy S4 smartphone with a sharper screen and plethora of software-enhanced features. Look no further than Cirrus Logic Inc. The chipmaker, with just $700 million in revenue, precipitated an 8 percent drop in Apple's share price over Wednesday and Thursday when it warned of reduced forecasts from one customer, widely assumed to be Apple. The warning spooked investors because Cirrus Logic relies on Apple for more than 90 percent of its sales. Shares in Apple suppliers across the globe, including chipmaker Qualcomm, South Korea's LG Display Co Ltd and Japan's Toshiba Corp, declined as a result. On Tuesday, Apple is expected to report a mere 8 percent increase in revenue in its fiscal second quarter, among the weakest showings in years, according to average analysts' estimates. And net earnings are expected to inch up just 2 percent as the intensifying competition compresses its margins. Some say Apple's current market malaise is a re-balancing from the years when the stock was celebrated as a sure-fire bet. The market became "irrational" about Apple with some analysts floating a $1,000 target price a year ago, said one hedge fund manager focused on the technology sector. Investors should have taken note when Apple missed revenue expectations in each of the past three quarters, said the manager, who declined to be identified. "The market is not being irrational with Apple today," he said. "The market was being irrational with Apple last year, when they kept taking the stock price higher." Ahead of reform, medical care slowdown hits U.S. companies By Bill Berkrot As the clock ticks down to the start of a U.S. healthcare overhaul, companies from device makers to hospital chains have been surprised to see Americans make even fewer trips to the doctor's office. Use of non-emergency medical services has been weak for several years in the wake of a deep recession, high joblessness and the steadily rising cost of care. Those trends now may be exacerbated in the months before President Barack Obama's healthcare law takes full effect in 2014, analysts said. Part of the reason is that employers are shifting more of the insurance benefits they offer to so-called high-deductible plans, requiring employees to pay more for their medical care upfront, to buffer new costs they face under "Obamacare". This is all starting to show in some weak and disappointing earnings reports for the first quarter. "It's still early in


For April 23, 2013


the reporting season, but so far it all points to softness. In the U.S. volumes at hospitals, in-patient and out-patient are soft," said David Heupel, senior healthcare analyst at Thrivent Investment Management. In the past week, medical testing companies, such as Quest Diagnostics, medical device makers Johnson & Johnson and Abbott Laboratories, hospital operators, such as HCA Holdings Inc, and even diaper maker Kimberly-Clark, which has a surgical supply unit, have cited a slowdown in use of medical services. Kimberly-Clark executives on Friday noted that other companies have reported surgical admissions down about 4 percent in the first quarter. Earlier this week, J&J reported a 10.5 percent decline in its U.S. surgical sales, and Chief Financial Officer Dominic Caruso said a modest upswing in medical device use seen in the fourth quarter did not persist into 2013. JP Morgan analyst Michael Weinstein, in a research note, said U.S. physician office visits were down 3.3 percent in March from a year ago, after a 3.6 percent decline in February. And HCA on Monday warned about a slowdown in the growth of hospital admissions and weakness in outpatient volumes in the quarter. "We've been seeing very similar trends come out that suggest utilization, which had started to pick up steam in the second half of 2012, seems to be sort of decelerating in the first quarter," said Morningstar analyst Debbie Wang in reference to the medical technology sector. Obama's healthcare law aims to extend insurance coverage to over 30 million additional Americans. While that will mean new clients for insurance companies, the law also requires them to bear new costs including full coverage of preventive health services. The Obama administration also has introduced a new tax on medical devices and provides for greater scrutiny of drug reimbursement, both of which may put pressures on pharmaceutical companies and device makers. The first wave of earnings reports and cautionary messages have already take a toll on some share prices. The Dow Jones U.S. Medical Equipment Index finished down 2.7 percent for the week. St. Jude Medical shares were off 3 percent and Quest shares have fallen 4 percent since they reported first-quarter results on Wednesday. HCA shares have declined 0.7 percent since Monday's announcement, about in line with the 0.6 percent decline in the broader S&P 500 Healthcare Index. However, larger more diversified companies such as JNJ and Abbott, with less exposure to medical care usage trends, both saw shares rise after reporting first-quarter earnings. WAITING UNTIL YEAR'S END Industry analysts said it was too early to gauge the full effect healthcare reform will have on corporate profits in 2013, and some are skeptical that trends seen in the first quarter are related to the new law. "It's just a continuation of this low utilization environment that we've been in, driven by the weak economy and lack of job growth - the same macro drivers that have been impacting the provider world for a few years now," said Thomas Carroll, an analyst with Stifel Nicolaus and Co who follows the healthcare insurance industry. However, Carroll did acknowledge that employers may already be shifting more healthcare costs to employees in anticipation of changes to benefit plans. UnitedHealth Group, the largest U.S. health insurer, on Thursday said it had seen an 18 percent rise in the number of consumers enrolled in high-deductible health plans in the first quarter. These consumers are likely to put off non-urgent medical care until after they have paid their maximum deductibles in the year. "People will consume healthcare services after they've met their deductibles, and so the fourth quarter will be strongest," said Heupel. Morningstar's Wang agreed that the pattern of healthcare consumption, with weakness seen in the first six months of the year followed by a stronger finish, was likely to continue. "Because cost sharing is not something that we think is going to diminish any time soon, as more of those out-of-pocket costs are shifted on to people, I think you will see this type of seasonal affect," she said.

ECON INDICATOR WED: Mortgage Index for w/e 04/19 Refinancing Index Durable Goods for Mar Ex-Transportation Ex-Defense Non-Defense ex-air Building Permits for Mar-Rev THU: Initial Claims for w/e 04/20 4 Week Average Continuing Claims for w/e 04/13 K.C. Fed Comp Index for Apr FRI: Real GDP qq SAAR for Q1-Adv Final sales Implicit Deflator Core PCE Price PCE Price Index Reuters/UMich for Apr-Fin Current Conditions Expectations ECRI Weekly Index for w/e 04/19 ET/GMT 0700/1100 0700/1100 0830/1230 0830/1230 0830/1230 0830/1230 TIME:TBA 0830/1230 0830/1230 0830/1230 1100/1500 0830/1230 0830/1230 0830/1230 0830/1230 0830/1230 0955/1355 0955/1355 0955/1355 1030/1430 REUTERS POLL ---2.8 pct 0.5 pct -2.3 pct 0.4 pct -351,000 -3.060 -3.0 pct 2.4 pct 1.4 pct 1.2 pct 1.1 pct 73.2 85.0 64.6 -PRIOR 866.1 4,685.1 5.6 pct -0.7 pct 4.4 pct -3.2 pct 0.902 mln 352,000 361,250 3.068 mln -5 0.4 pct 1.9 pct 1.0 pct 1.0 pct 1.6 pct 72.3 84.8 64.2 130.6 Economic Cycle Research Institute Reuters/University of Michigan. Part of the Surveys of Consumers Bureau of Economic Analysis (Department of Commerce) Census Bureau Labor Department Census Bureau (Department of Commerce) SOURCE Mortgage Bankers Association


For April 23, 2013


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

Apple Amgen Air Products C. R. Bard Broadcom Coach DuPont Discover Financial Services Edwards Lifesciences Forest Laboratories FMC Technologies Gannett Ingersoll Rand Illinois Tool Works Johnson Controls Juniper Networks Lockheed Martin Molex Nabors Industries Newfield Exploration Norfolk Southern Owens-Illinois PACCAR Inc Pentair Ryder System Reynolds American Regions Financial Robert Half International AT&T Torchmark The Travelers Companies Total System Services United Technologies Waters Xerox Yum! Brands

Q2 Q1 Q2 Q1 Q1 Q3 Q1 Q1 Q1 Q4 Q1 Q1 Q1 Q1 Q2 Q1 Q1 Q3 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1

$10.03 $1.84 $1.37 $1.42 $0.56 $0.80 $1.52 $1.12 $0.76 $0.14 $0.46 $0.35 $0.40 $0.96 $0.42 $0.21 $2.04 $0.35 $0.28 $0.45 $1.17 $0.57 $0.68 $0.56 $0.78 $0.69 $0.20 $0.41 $0.64 $1.37 $2.02 $0.34 $1.29 $1.09 $0.24 $0.60

$12.30 $1.61 $1.31 $1.61 $0.65 $0.77 $1.61 $1.18 $0.53 $0.72 $0.41 $0.34 $0.31 $0.97 $0.53 $0.16 $2.02 $0.37 $0.65 $0.90 $1.23 $0.73 $0.91 $0.64 $0.59 $0.63 $0.11 $0.34 $0.60 $1.27 $2.01 $0.30 $1.31 $1.00 $0.23 $0.76

$42,310 $4,371 $2,589 $728 $1,914 $1,178 $10,410 $1,978 $519 $805 $1,590 $1,242 $3,166 $4,273 $10,487 $1,065 $10,314 $918 $1,641 $650 $2,779 $1,707 $3,703 $1,800 $1,574 $1,923 $1,328 $1,044 $31,746 $955 $5,615 $478 $14,936 $432 $5,497 $2,556

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


For April 23, 2013


Company Smart Estimate Predicted Surprises Market Cap. Industry

Liberty Media Weyerhaeuser Pultegroup KKR & Co Kinder Morgan Management Wynn Resorts Melco Crown Entertainment Carlyle Group Manulife Financial W.R. Berkley XL Group LinkedIn Westlake Chemical Everest Re Group Valero Energy Moody's Marathon Petroleum Gap Rogers Communications Baidu Southern Copper Newmont Mining HCA Holdings Goldcorp Forest Laboratories

$0.39 $0.26 $0.16 $0.85 $0.67 $1.64 $0.25 $0.98 $0.36 $0.77 $0.67 $0.31 $1.30 $4.53 $1.01 $0.87 $2.21 $0.58 $0.77 $1.01 $0.59 $0.75 $0.78 $0.35 $0.12

20.70% 12.25% 11.06% 8.09% 7.71% 5.82% 4.85% 4.67% 4.64% 4.01% 3.59% 3.38% 3.37% 3.22% 3.13% 2.59% 2.41% 2.40% 2.38% -2.07% -2.32% -7.83% -8.80% -12.33% -19.54%

$13,097 Media $16,272 Real Estate Investment Trusts (REITs) $6,971 Household Durables $13,204 Capital Markets $10,117 Oil, Gas & Consumable Fuels $12,872 Hotels Restaurants & Leisure $12,363 Hotels Restaurants & Leisure $9,870 Capital Markets $25,419 Insurance $6,019 Insurance $8,973 Insurance $19,079 Internet Software & Services $5,533 Chemicals $7,548 Insurance $21,744 Oil, Gas & Consumable Fuels $12,215 Diversified Financial Services $26,055 Oil, Gas & Consumable Fuels $17,216 Specialty Retail $26,111 Wireless Telecommunication Services $30,221 Internet Software & Services $26,719 Metals & Mining $16,221 Metals & Mining $16,764 Health Care Providers & Services $22,602 Metals & Mining $9,562 Pharmaceuticals

StarMine SmartEstimates predict future earnings more accurately than consensus (or mean) estimates by putting more weight on the recent forecasts of StarMine's toprated analysts. StarMine is a subsidiary of Thomson Reuters. The predicted surprise is the difference between the SmartEstimate and consensus. When a predicted surprise is 2 percent or more, history shows that you can anticipate an earnings surprise in the same direction with an accuracy rate of 70 percent.

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