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Well-Fargo-5-24-12.pdf
Please see page 7 for rating definitions, important disclosures and required analyst certifications Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision. May 24, 2012 Equity Research Equity Squawks 8:30 P.M. Edition INSIDE THIS ISSUE Page Headline Analyst 2 MA: MasterCard Inc.: Ma: Eu Ruling Not To Have An Impact On Ma Income Statement Willi 2 TIF: Tiffany & Co.: Tif: Misses Q1 Eps By $0.05 And Lowers 2012 Eps Guidance Kopelman 3 MA: MasterCard Inc.: Ma: Eu Court Rules Against Cross- Border Interchange Willi 3 ETR, ITC, IDA: Energy And Utility Daily Kalton 4 INCY, YMI: Healthy Discussion About Jakafi And Jak Inhibitors Continues In This Week's Nejm Abrahams 5 GILD: Gilead Sciences, Inc.: Gild: Cayston Supply Issues Waning Abrahams 5 RAX: Rackspace Hosting, Inc.: Rax: Highlights From Investor Meetings In La Powell 6 TEVA: Teva Pharmaceutical Industries Ltd.: Teva: To Host Business And Guidance Update Call Tong 6 NDAQ: The NASDAQ OMX Group, Inc.: Ndaq: Listings ''Switching'' Reports Surface Harris 7 VIAB: Viacom Inc.: Viab: Viacom Raises Its Dividend 10% Ryvicker Equity Squawk Newsletter Equity Squawks Equity Research Department WELLS FARGO SECURITIES, LLC Equity Squawk Newsletter EQUITY RESEARCH DEPARTMENT 2 MA: Eu Ruling Not To Have An Impact On Ma Income Statement MasterCard Inc. Analyst: Timothy Willi (TRANSACTION PROCESSING, OVERWEIGHT) (MA, $417.09, OUTPERFORM) We had a chance to talk with management of MA and it has made it clear that the EU ruling last night (referenced in a previous note this morning) will not have a negative impact on the income statement of MA. The ruling addressed interchant rates that are accruing to the bank, they did not at all encompass the cross-border fees that MA charges. As a result, there is no income statement impact for MA from this ruling. Furthermore, it intends to keep its interchange rates of 20bp for debit and 30bp for credit in place for the time being while it continues to work with the courts to come to an appropriate resolution around cross-boder interchange rates in the Euro-zone. We believe that shares may pull back a bit on this news but would view it as a buying opportunity as it will not impact the income stream of MA. We would also point out that, even with intechange (payable to the banks) at risk, both MA and V have shown the ability to manage shifts in economics for their bank issuers (the impact of Durbin) and protect the underlying profit and growth dynamices of their own income statements giving us confidence that the situation in the EU will not have a major negative impact on MA as we move forward. TIF: Misses Q1 Eps By $0.05 And Lowers 2012 Eps Guidance Tiffany & Co. Analyst: Evren Kopelman, CFA (TEXTILES, APPAREL, & LUXURY, MARKET WEIGHT) (TIF, $61.80, OUTPERFORM) ** TIF reported Q1 EPS of $0.64 vs. our estimate and consensus of $0.69. Sales were generally in line with our expectations although the Americas (flat Q1 comps vs. our estimate for up 3%) was weaker while Japan was stronger (comps up 12% vs. our estimate for up 6%). Asia Pacific and Europe were in line with our estimates and comped up 10% and flat, respectively. The miss was mainly due to operating margin which was 16.5%, down 240bps y/y, vs. our expectation for down 120bps y/y, driven mostly by higher expenses (increased labor, store occupancy and marketing costs). ** TIF lowered 2012 EPS guidance to $3.70-3.80 from $3.95-4.05 previously. Consensus is $3.97. Sales guidance was also lowered to up 7-8% from up 10% previously. Additionally, operating margins are now expected to be down modestly vs. previous guidance of flat y/y. While the stock has moved lower in recent weeks (most on European fears we believe), we don't believe the magnitude of the EPS guide-down was expected. Currently, the stock is down 7% before market open which is relatively in line with the 6% lower EPS guidance. ** Conference call is at 8:30am (management comments only, no Q&A). Dial in: 888-240-9334 / Passcode 4057832 WELLS FARGO SECURITIES, LLC Equity Squawks EQUITY RESEARCH DEPARTMENT 3 MA: Eu Court Rules Against Cross-Border Interchange MasterCard Inc. Analyst: Timothy Willi (TRANSACTION PROCESSING, OVERWEIGHT) (MA, $417.09, OUTPERFORM) Overnight the EU's second highest court ruled that banks have been overcharging for cross-border interchange rates, denying an appeal by MA of a ruling back in 2007. With the 2007 ruling MA voluntarily reduced its cross-border interchange rates on an interim basis without accpeting wrong- doing. It is likely, based upon an article by the Financial Times (we have not yet been able to talk to MA) that MA will appeal the most recent ruling. What is not completely clear to us is whether or not there is further need for price reductions by MA given it voluntariliy reduced rates sevearl years ago. It is possible in reading some reports that this ruling just clears the way for further court action as opposed to any mandated price action. Nonetheless, we believe that if there is a requirement to reduce rates that a portion of the the revenue in play accrues directly to the issuing banks as opposed to MA directly. As such, we believe that the impact to the income statement of MA is manageable. That being said, we wouldn't be surprised by some initial pullback in the share price due to this ruling but would view it as an opportunity to add to positions, given our belief that the impact would be manageable and the valuation remains attractive relative to the profitability and secular growth profile of the company. Energy And Utility Daily Analyst: Neil Kalton, CFA (ENERGY TEAM, NA) (ETR, $63.66, OUTPERFORM) (ITC, $69.75, OUTPERFORM) (IDA, $38.73, OUTPERFORM) Quick thoughts from Wells Fargo Securities, LLC Energy & Utility Team: Utilities Entergy (ETR/Outperform) & ITC Holdings (ITC/Outperform) (Kalton) - On 5/23, the Louisiana PSC unanimously approved ETR's proposal to join the Midwest Independent System Operator (MISO). Under the order, Entergy Louisiana and Entergy Gulf States would transfer control (but not ownership) of their wholesale transmission facilities to MISO pending the outcome of similar requests in AR, MS & TX. While we are not surprised by the LPSC's decision, we view the order as a positive data point in relation to ETR's proposal to divest the company's transmission assets to ITC. The ITC deal is contingent on ETR's state regulators approving ETR joining a Regional Transmission Organization (RTO) such as MISO. Notably, some LPSC members initially expressed skepticism around the MISO proposal but in the end the decision was unanimous. While the MISO and ITC proposals are different, at the least we view the LPSC MISO decision as an indication of openness toward change (different structures) as it relates to transmission. With the LPSC order in hand, all eyes will be on the Arkansas PSC's RTO decision expected later this summer. A competitor RTO, the Southwest Power Pool (SPP), is headquartered in AR and there could be some political pressure for the APSC to favor the SPP. It is our understanding that should the APSC not approve MISO it could complicate the ITC transaction. WELLS FARGO SECURITIES, LLC Equity Squawk Newsletter EQUITY RESEARCH DEPARTMENT 4 IDACORP (IDA/Outperform) (Akers) - On 5/22, Hoku Corporation (HOKU/Not Rated) issued a business update indicating that construction has stopped on the polysilicon production facility in Pocatello, Idaho, and the company plans to restructure its liabilities. Idaho Power has an agreement to provide electric service to the plant, which was amended earlier this year due to Hoku's financial challenges. Based on the revised contract, Idaho Power expects to recognize $5.4mm of annual pre-tax revenues (excluding payments affected by the power cost adjustment PCA mechanism). In light of Hoku's 5/22 announcement, we think it is reasonable to expect payments under the electric contract will cease, though a notice of termination is not yet available. On an annual after-tax basis, this represents $0.07-0.08 per share, or 2-3%. Favorably, Idaho Power's rate settlement allows the company to accelerate the amortization of accumulated deferred investment tax credits (ADITCs) in order to achieve a 9.5% ROE. We expect any Hoku-related drag in '12E and '13E will be fully offset by ADITC usage. While we prefer that Idaho Power preserve the ADITC balance as much as possible (total $45mm available 2012-14 with an annual max of $25mm), we highlight that the company is not precluded from seeking base rate relief during the 2012-14 settlement period. No change to our '12-14E EPS of $3.05, $3.20 and $3.30. Further, we do not expect the loss of demand to impact IDA's growth outlook as the facility is in Idaho Power's eastern footprint whereas most of the load pressure/growth is in southwest Idaho. Reiterate Outperform on what we view as a compelling valuation. INCY/YMI: Healthy Discussion About Jakafi And Jak Inhibitors Continues In This Week's Nejm Analyst: Brian Abrahams, M.D. (BIOTECHNOLOGY, MARKET WEIGHT) (INCY, $22.57, MARKET PERFORM / V) (YMI, $1.97, OUTPERFORM / V) ** In this week's New England Journal of Medicine, which became available online last evening, there was notable correspondence among KOLs involved in Jakafi phase III trials in response to comments from the physician community. ** There were three letters to the editor, which provided comments and questions regarding the Jakafi phase III studies (COMFORT I/II) and its real-world use. Questions seemed to center on some ongoing debates in the field, primarily between the principal investigators of the Jakafi phase III studies (Drs. Harrison and Verstovsek) and Dr. Tefferi, who has been a vocal critic of Jakafi's therapeutic benefit. ** Written commentary inquired about Jak inhibitors' lack of effect on Jak2-V617F allele burden, whether Jak-1 inhibition could have potential harm given Jak-1 is not involed in the pathogenesis of MF, and which MF populations (early-stage, later-stage, etc.) may be most appropriate for Jakafi. Drs. Harrison and Verstovsek provided reasonable responses, in our view, clarifying some of the misconceptions and controversies based on the clinical data. ** While questions raised in the letters reflect a need to further physician understanding about Jakafi, we believe having an ongoing discussion in a respected public forum such as NEJM should in itself help educate physicians about the recently-launched agent. ** Dr. Tefferi remained highly critical of Jakafi, reiterating his concerns about the agent's unclear survival benefits, questionable durability in his opinion, and side effect limitations. While we believe Dr. Tefferi's views may be overly negative and not representative of the broader physician community, his pitch for physicians to enroll patients in clinical trials of new agents which cause less myelosuppression should at least benefit YMI as they gear up for their CYT387 phase program. WELLS FARGO SECURITIES, LLC Equity Squawks EQUITY RESEARCH DEPARTMENT 5 ** BOTTOM LINE: Our views on INCY and YMI remain unchanged. We remain impressed with the initial Jakafi launch but believe growth could temper, and view INCY shares as fairly valued. We believe YMI shares underestimate the promise of CYT387, despite potential phase III challenges. GILD: Cayston Supply Issues Waning Gilead Sciences, Inc. Analyst: Brian Abrahams, M.D. (BIOTECHNOLOGY, MARKET WEIGHT) (GILD, $50.20, OUTPERFORM) This week GILD provided an update to physicians indicating that supply restrictions for Cayston will be lifted in early July. It appears that they have adequately addressed the manufacturing issues announced in February, which had precluded them from meeting U.S. demand and led to prioritization of patients on treatment or those with significant clinical need. ** In addition to manufacturing at full capacity at its California facility, GILD indicated a contract manufacturer is also manufacturing Cayston batches. ** Cayston comprises a small (1%) proportion of our GILD total revenue estimate in 2012, growing to 1.5% by 2016 (~$197MM). ** BOTTOM LINE: Resolution of the Cayston supply issue is unlikely to have a material impact on GILD, although it is a positive step. We remain bullish on GILD due to its market-leading HIV franchise and the potential of '7977 to be a leading HCV backbone. RAX: Highlights From Investor Meetings In La Rackspace Hosting, Inc. Analyst: Gray Powell, CFA (INTERNET INFRASTRUCTURE, OVERWEIGHT) (RAX, $51.59, OUTPERFORM / V) We hosted investor meetings Jason Luce - VP and Bryan McGrath - Director - in RAX's finance group Wednesday. OPENSTACK WILL ENABLE RAX TO ADDRESS LARGER CLOUD DEPLOYMENTS. RAX was very bullish on the upcoming Openstack launch as it puts their cloud technology on par AWS and provides the ability to support larger deployments (i.e., 1,000s of servers/customer) that the current platform can not. Today, RAX's largest cloud customer pays something in the $20K/month range. Once RAX launches Openstack - they will be able to support deals over $200K/month. While this puts RAX more in a niche dominated by Amazon - RAX said it will differentiate with a 100% uptime SLA (not offered by AWS) and superior customer support. OPENSTACK MEANINGFULLY INCREASES THE MARKET OPPORTUNITY. Today only ~20% of workloads are hosted in third party environments while 80% are on-premise. RAX currently platform addresses a portion of the 20% that is outsourced. Once Openstack is launched RAX will address the entire market and essentially increase their opportunity by 5x. Management noted a large number of Fortune 100 companies use some form of Openstack in on-premise deployments today and could become customers longer term. For example, Fidelity runs Openstack for some applications and at a recent developers conference announced they would let RAX support the on- premise deployment later this year. WELLS FARGO SECURITIES, LLC Equity Squawk Newsletter EQUITY RESEARCH DEPARTMENT 6 INSIGHTS ON CLOUD REVENUE GROWTH. In Q1, cloud revenue grew 10.8% from Q4'11 vs an average qtr/qtr rate of 16.8% the prior 4 quarters. Management noted new customers could hold back in Q2 to wait for the new platform. However, they also appeared confident that installed base growth should improve to the 1.0%/month range - the average in 2011 - from 0.7% growth in Q1'12 as some 1x customer issues impacted Q1 trends. Thus, while cloud revenue could be volatile near term - we remain confident in our Q2 revenue forecasts. BOTTOM LINE - We continue to rate RAX Outperform. TEVA: To Host Business And Guidance Update Call Teva Pharmaceutical Industries Ltd. Analyst: Michael Tong, CFA, PhD (GENERIC DRUGS, OVERWEIGHT) (TEVA, $38.58, OUTPERFORM) ***New CEO Dr. Jeremy Levin will host a conference call to discuss his transition to CEO and provide a general business and 2012 guidance update. ***At Q1 earnings, management was not prepared to update 2012 guidance and we think the stock has traded lower largely on caution ahead of an expected guidance revision. ***Prior 2012 cash EPS guidance, provided 12/21/2011, was $5.48-5.68 on revenue of $22B. Given FX impact on revenue, a challenging EU Generics environment, and the very competitive U.S. Generics market, we see potential for 2012 revenue and cash EPS guidance reductions of ~5% (bringing guidance to ~$5.20-5.40 on revenue of $21B). ***That said, we would not expect a significant negative reaction in shares given our perception that the market is expecting a downward guidance revision; provided the revision is not materially worse than 5%, we see potential that shares could trade higher over the next several trading days on clearance of an uncertainty overhang. ***Conference Call 5/24/2012 at 8am; dial-in: 1-866-783-2143, passcode: 43155217. NDAQ: Listings ''Switching'' Reports Surface The NASDAQ OMX Group, Inc. Analyst: Christopher Harris, CFA (EXCHANGES & MARKET STRUCTURE, MARKET WEIGHT) (NDAQ, $21.81, MARKET PERFORM) * Reuters reported that a high-profile company which IPO'd on Friday (5/18) is considering switching its listing from NDAQ to NYX. This follows technical problems NDAQ experienced with the IPO which caused a delay in the launch and delays in trade executions and confirmations. Fox Business News reported that NYX has also made an overture to Zynga to switch its listing from NDAQ to NYX. For its part, NYX has refuted the claim by Reuters and noted it is not in discussions with the high-profile company about a listings switch. * While NYX is apparently not in discussions at this time, we do expect it to actively market its systems as superior in the wake of Friday's mishandled IPO in an effort to capture more listings business. This could give NYX a leg up on winning future IPOs and other new listings business. WELLS FARGO SECURITIES, LLC Equity Squawks EQUITY RESEARCH DEPARTMENT 7 However, we would be surprised if a significant number of companies switched from NDAQ to NYX solely as a result of recent events. If they were to switch, that is a much larger threat to NDAQ's business than potential loss of future IPO fee revenue, in our view. * In 2011, IPO fees accounted for only 1% of NDAQ's revenues. US annual renewal fees and secondary fees, which apply to companies currently listed on NDAQ, accounted for a much larger 9% of revenue. This revenue could become jeopardized if companies decide to switch to NYX from NDAQ. While we think material risk to these revenues is minimal as noted above, continued press reports on this issue could weigh on NDAQ stock. VIAB: Viacom Raises Its Dividend 10% Viacom Inc. Analyst: Marci Ryvicker, CFA, CPA (DIVERSIFIED ENTERTAINMENT, OVERWEIGHT) (VIAB, $47.21, MARKET PERFORM) Viacom raised its dividend 10% this afternoon on Class A and B shares to $0.275 per quarter. The increase takes effect with the company's next quarterly dividend, and will be payable on July 2, 2012 to stockholders of record at the close of business on June 15, 2012. The timing of the announcement was not a surprise, as the company was due for an increase. Over the last two fiscal years, Viacom raised its dividend twice - once on May 25, 2011, and another time on June 9, 2010. VIAB has solid FCF generation and a healthy balance sheet. Based on the higher dividend, we estimate that dividend payments over the next four quarters would amount to $560M, compared to our estimated FCF generation of $2.8B over the next four quarters, which equates to a 20% dividend payout ratio. Additionally, the company has a relatively healthy balance sheet with net debt/cap at 42.7% in FQ2, and the company is slightly under its targeted 2.0x gross debt/EBITDA leverage ratio at 1.8x at the end of FQ2. The dividend yield remains above the peer group average. With the 10% dividend increase, Viacom's dividend yield moves from 2.1% to 2.4% based on today's stock price, which is higher than the diversified peer group average of 1.7% Bottom line, the dividend increase was expected, but the 10% raise was lower than our 20% expectation. We view today's announcement as only a mild positive, and reiterate our Market Perform rating. Required Disclosures To view price charts for all companies rated in this document, please go to www.wellsfargo.com\research or write to 7 Saint Paul Street, 1st Floor, R1230-012, Baltimore, MD 21202 ATTN: Research Publications MA - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/20/09 NA OUTPERFORM TIF - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 1/11/10 46.68 OUTPERFORM $54-$56 46.68 ETR - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/19/09 NA OUTPERFORM $84-$86 74.75 WELLS FARGO SECURITIES, LLC Equity Squawk Newsletter EQUITY RESEARCH DEPARTMENT 8 $220-$225 169.63 7/31/09 194.11 OUTPERFORM $235-$245 194.03 11/10/09 242.19 OUTPERFORM $270-$280 238.67 1/7/10 255.20 MARKET PERFORM $270-$280 253.89 2/5/10 222.11 OUTPERFORM $270-$280 220.74 3/29/10 246.82 OUTPERFORM $275-$285 248.01 9/14/10 193.03 OUTPERFORM $250-$260 199.75 11/2/10 245.83 OUTPERFORM $295-$305 245.98 5/3/11 283.02 OUTPERFORM $305-$315 282.38 6/30/11 309.70 OUTPERFORM $340-$350 301.34 8/4/11 338.47 OUTPERFORM $370-$380 322.60 11/2/11 354.17 OUTPERFORM $380-$400 357.66 2/3/12 381.57 OUTPERFORM $420-$440 390.32 5/3/12 451.45 OUTPERFORM $480-$500 442.43 5/7/10 44.79 OUTPERFORM $51-$54 43.55 5/28/10 45.73 OUTPERFORM $52-$55 45.43 8/6/10 43.26 OUTPERFORM $46-$48 43.34 11/30/10 60.64 OUTPERFORM $61-$64 62.10 1/12/11 60.99 OUTPERFORM $64-$67 60.99 3/21/11 60.22 OUTPERFORM $68-$72 60.22 5/26/11 76.20 OUTPERFORM $79-$84 76.04 8/31/11 72.16 OUTPERFORM $81-$86 71.96 10/24/11 76.28 OUTPERFORM $80-$84 76.28 11/29/11 67.78 OUTPERFORM $76-$80 67.22 1/10/12 60.50 OUTPERFORM $63-$67 59.94 3/21/12 72.78 OUTPERFORM $79-$83 72.91 8/26/09 81.79 OUTPERFORM $91-$93 81.00 2/4/10 77.11 OUTPERFORM $88-$90 77.11 4/16/10 81.06 OUTPERFORM $86-$88 80.19 4/30/10 81.29 OUTPERFORM $88- $90 81.29 10/21/10 75.29 OUTPERFORM $80- $81 75.28 1/5/11 73.11 MARKET PERFORM $76- $77 72.53 5/27/11 67.22 OUTPERFORM $77-$78 67.77 12/6/11 72.39 OUTPERFORM $88-$91 71.94 1/3/12 73.05 OUTPERFORM $82-$84 72.52 1/31/12 69.38 OUTPERFORM $80-$82 69.38 4/26/12 66.19 OUTPERFORM $76-$78 66.19 ITC - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/19/09 NA OUTPERFORM $49- $51 41.37 7/30/09 47.00 OUTPERFORM $54- $56 47.00 10/6/09 44.15 OUTPERFORM $60-$62 45.14 12/14/09 50.15 OUTPERFORM $64-$66 49.98 1/27/10 52.60 OUTPERFORM $67-$69 52.60 7/29/10 56.77 OUTPERFORM $69-$71 57.02 9/28/10 62.60 OUTPERFORM $75-$77 62.48 2/23/11 66.89 OUTPERFORM $77- $79 66.97 4/28/11 71.05 OUTPERFORM $80- $82 71.05 7/18/11 71.02 OUTPERFORM $84- $86 71.02 12/6/11 76.07 OUTPERFORM $90- $93 72.37 IDA - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/19/09 NA MARKET PERFORM $26-$27 22.92 8/6/09 27.79 MARKET PERFORM $27-$29 27.79 9/10/09 28.37 MARKET PERFORM $29-$30 28.37 11/10/09 29.52 MARKET PERFORM $30-$31 29.52 12/14/09 31.18 MARKET PERFORM $32-$33 31.54 2/25/10 33.94 MARKET PERFORM $35-$36 33.89 8/6/10 35.75 MARKET PERFORM $36-$37 36.05 10/29/10 37.00 MARKET PERFORM $38- $39 36.80 11/15/10 36.34 OUTPERFORM $40-$41 36.52 2/9/11 38.22 OUTPERFORM $41-$42 38.05 5/5/11 38.91 OUTPERFORM $42-$43 38.91 7/19/11 39.83 OUTPERFORM $43-$44 39.84 8/4/11 36.47 OUTPERFORM $41-$42 36.47 10/24/11 40.51 MARKET PERFORM $42-$43 40.43 11/4/11 41.33 MARKET PERFORM $43-$44 40.43 1/3/12 42.41 MARKET PERFORM $44-$45 41.80 4/27/12 40.45 OUTPERFORM $44-$45 40.86 INCY - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/19/09 NA Not Rated $2-$3 2.80 4/5/11 16.31 MARKET PERFORM $17- $19 16.45 10/27/11 14.70 MARKET PERFORM $16-$18 14.70 11/16/11 12.94 MARKET PERFORM $15-$18 12.94 4/2/12 19.30 MARKET PERFORM $17-$19 19.73 4/27/12 21.93 MARKET PERFORM $18-$21 22.94 YMI - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 4/5/11 2.52 OUTPERFORM $4-$5 2.54 GILD - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/19/09 NA OUTPERFORM $62-$65 42.69 4/21/10 45.07 OUTPERFORM $60-$64 40.76 6/28/10 36.00 Suspended NE 35.77 12/9/10 36.99 OUTPERFORM $48-$52 36.99 4/8/11 41.60 OUTPERFORM $50-$54 41.25 RAX - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 1/13/10 21.18 OUTPERFORM $26-$28 22.14 2/17/10 18.81 OUTPERFORM $24-$27 20.11 5/3/10 19.15 OUTPERFORM $25-$27 19.15 11/9/10 26.29 OUTPERFORM $28-$31 27.06 2/3/11 35.06 OUTPERFORM $42-$45 35.06 WELLS FARGO SECURITIES, LLC Equity Squawks EQUITY RESEARCH DEPARTMENT 9 1/17/12 44.89 OUTPERFORM $55-$59 46.26 2/9/12 53.73 OUTPERFORM $60-$64 53.73 2/17/12 46.70 OUTPERFORM $58-$62 47.00 4/12/12 45.42 OUTPERFORM $60-$64 45.72 4/30/12 51.91 OUTPERFORM $59-$63 52.02 2/11/11 37.02 OUTPERFORM $46-$50 40.07 5/9/11 43.27 OUTPERFORM $50-$52 43.27 8/4/11 36.76 OUTPERFORM $51-$53 36.76 9/16/11 38.17 Suspended NE 38.39 11/21/11 39.56 OUTPERFORM $53-$58 39.56 2/13/12 49.23 OUTPERFORM $60-$62 49.23 TEVA - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/20/09 NA OUTPERFORM $53-$57 44.70 7/28/09 53.25 OUTPERFORM $59-$64 53.25 11/3/09 49.85 OUTPERFORM $59-$63 50.49 1/8/10 56.84 OUTPERFORM $63-$68 59.34 2/16/10 58.44 OUTPERFORM $64- $68 58.14 5/4/10 59.01 OUTPERFORM $68- $71 59.03 7/26/10 49.38 OUTPERFORM $62- $64 50.15 9/8/10 54.31 OUTPERFORM $64- $66 54.31 11/2/10 50.26 OUTPERFORM $64- $67 50.93 1/12/11 53.76 OUTPERFORM $65-$67 54.44 2/8/11 51.45 OUTPERFORM $63-$65 52.02 4/27/11 45.98 OUTPERFORM $62-$65 45.98 8/1/11 43.79 OUTPERFORM $58-$61 43.76 8/15/11 39.70 OUTPERFORM $51-$55 40.68 10/17/11 39.17 OUTPERFORM $51- $54 39.29 12/21/11 41.60 OUTPERFORM $50- $53 41.76 NDAQ - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 10/14/10 19.83 MARKET PERFORM $20-$22 19.96 12/16/10 23.46 MARKET PERFORM $23-$24 23.46 2/2/11 26.51 MARKET PERFORM $28-$29 26.51 4/21/11 27.32 MARKET PERFORM $29-$30 27.54 5/5/11 26.66 Suspended NE 26.51 5/17/11 26.23 MARKET PERFORM $28-$29 25.95 7/27/11 23.50 MARKET PERFORM $26-$27 23.50 8/10/11 22.62 MARKET PERFORM $24-$25 21.47 10/12/11 25.07 MARKET PERFORM $25-$28 25.29 VIAB - Rating and Target Price Changes/Disclosures Update Date Publication Price Rating Valuation Range Closing Price 5/20/09 NA MARKET PERFORM $18-$20 20.59 7/29/09 23.75 MARKET PERFORM $20-$22 22.57 10/16/09 28.52 MARKET PERFORM $26-$28 27.83 1/13/10 29.48 MARKET PERFORM $28-$30 28.99 4/26/10 36.60 MARKET PERFORM $36- $38 35.76 6/10/10 33.71 Suspended NE 33.18 1/30/12 47.90 MARKET PERFORM $51- $53 47.90 Additional Information Available Upon Request I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. Wells Fargo Securities, LLC maintains a market in the common stock of Viacom Inc., Entergy Corp., Gilead Sciences, Inc., Incyte Corporation, Teva Pharmaceutical Industries Ltd., IDACORP, Inc., The NASDAQ OMX Group, Inc., MasterCard Inc., ITC Holdings, Rackspace Hosting, Inc., YM BioSciences Inc., Tiffany & Co. Wells Fargo Securities, LLC or its affiliates managed or comanaged a public offering of securities for YM BioSciences Inc., Gilead Sciences, Inc., Viacom Inc. within the past 12 months. Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from Viacom Inc., Entergy Corp., Gilead Sciences, Inc., IDACORP, Inc., YM BioSciences Inc., Rackspace Hosting, Inc., ITC Holdings, MasterCard Inc., The NASDAQ OMX Group, Inc. Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from YM BioSciences Inc., IDACORP, Inc., Gilead Sciences, Inc., Entergy Corp., Viacom Inc. in the past 12 months. Wells Fargo Securities, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of MasterCard WELLS FARGO SECURITIES, LLC Equity Squawk Newsletter EQUITY RESEARCH DEPARTMENT 10 Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC’s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading. As of: May 24, 2012 48% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. Wells Fargo Securities, LLC has provided investment banking services for 42% of its Equity Research Outperform-rated companies. 50% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform. Wells Fargo Securities, LLC has provided investment banking services for 32% of its Equity Research Market Perform-rated companies. 2% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided investment banking services for 26% of its Equity Research Underperform-rated companies. Inc., ITC Holdings, Rackspace Hosting, Inc. YM BioSciences Inc., Viacom Inc., Entergy Corp., Gilead Sciences, Inc., IDACORP, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to YM BioSciences Inc., Viacom Inc., Entergy Corp., Gilead Sciences, Inc., IDACORP, Inc. IDACORP, Inc., Rackspace Hosting, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to IDACORP, Inc., Rackspace Hosting, Inc. The NASDAQ OMX Group, Inc., IDACORP, Inc., Entergy Corp., Viacom Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to The NASDAQ OMX Group, Inc., IDACORP, Inc., Entergy Corp., Viacom Inc. 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