Of the 11,443 ratings on S&P 500 companies at the end of the second quarter, 50% were Buy ratings, 44% were Hold ratings, and 6% were Sell ratings.

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1 TARGET & RATINGS John Butters, VP, Sr. Earnings Analyst Media Questions/Requests S&P 500 July 1, 2016 Key Metrics: Of the 11,443 ratings on S&P 500 companies at the end of the second quarter, 50% were Buy ratings, 44% were Hold ratings, and 6% were Sell ratings. At the sector level, the Health Care sector had the highest percentage of Buy ratings (56%), while the Energy sector had the highest percentages of Sell ratings (10%). During the second quarter, the number of Buy ratings decreased by 3.2%, the number of Hold ratings did not change (0.0%), and the number of Sell ratings increased by 9.1%. The bottom-up target price for the S&P 500 at the end of the second quarter was , which was 10.0% above the June 30 closing price of At the sector-level, the Information Technology sector had the largest upside difference between the bottom-up target price and the closing price (+16.2%), while the Telecom Services sector had the largest downside difference between the bottom-up target price and the closing price (-4.0%). To receive this report by , please go to: To view other market stories with FactSet content, please go to: All data published in this report is available on FactSet. Please contact or FACTSET for more information. FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 1

2 Overview: Industry Analysts Project 10% Price Increase for S&P 500 over Next 12 Months After seeing a drop in price of 5.3% (to from ) during the two trading days after the Brexit vote, the S&P 500 index recorded an increase in value of 4.9% during the final three trading days of the quarter to finish the second quarter at Where do industry analysts believe the price will go from here? Industry analysts in aggregate predict the S&P 500 will see a 10.0% increase in price over the next twelve months. This percentage is based on the difference between the bottom-up target price and the closing price for the index at the end of June. The bottom-up target price is calculated by aggregating the mean target price estimates (based on company-level estimates submitted by industry analysts) for all the companies in the index. On June 30, the bottomup target price for the S&P 500 was , which was 10.0% above the closing price of How accurate have the industry analysts been in predicting the future value of the S&P 500? Over the previous year (July 2015 to June 2016), the average difference between the bottom-up target price estimate at the end of the month one year ago and the final price for the index at the end of the same month one-year later has been +9.7%. In other words, industry analysts on average have overestimated the final price of the index by 9.7% at the end of each month during the previous year. Over the previous five years (July 2011 to June 2016), the average difference between the bottom-up target price estimate at the end of the month one year ago and the final price for the index at the end of that same month one year later has been +1.6%. In other words, industry analysts on average have overestimated the final price of the index by 1.6% at the end of each month during the previous five years. FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 2

3 Ratings: Small Uptick in Sell Ratings during Q2 Of the 11,443 ratings on S&P 500 companies at the end of the second quarter (June 30), 49.7% were Buy ratings, 44.3% were Hold ratings, and 6.0% were Sell ratings. During the second quarter, the overall number of ratings decreased by 1.1% (to 11,443 from 11,574). Buy Ratings: Down 3.2% The number of Buy ratings declined by 3.2% (to 5,684 from 5,872) compared to Q1. Only two sectors saw an increase in Buy ratings: Industrials (+3%) and Consumer Discretionary (+1%). Eight sectors witnessed a decrease in Buy ratings, led by the Telecom Services (-12%), Utilities (-11%), Materials (-11%), and Health Care (-10%) sectors. At the company level in terms of Buy ratings, Halliburton (+5) and Home Depot (+5) recorded the largest increases in the number of Buy ratings during the quarter, while St. Jude Medical (-15), FMC Technologies (-6), and Prologis (-6) witnessed the largest decreases in the number of Buy ratings over this time frame. Hold Ratings: No Change (0%) The number of Hold ratings remained unchanged (5,074) relative to Q1. Five sectors witnessed a rise in the number of Hold ratings, led by the Telecom Services (+10%) and Health Care (+8%) sectors. One sector (Utilities) saw no change in the number of Hold ratings over this period. Four sectors witnessed a drop in the number of Hold ratings, led by the Consumer Staples (-9%) sector. At the company level in terms of Hold ratings, St. Jude Medical (+12), Endo International (+6), Global Payments (+6), and Prologis (+6) recorded the largest increases in the number of Hold ratings during the quarter, while TECO Energy (-6), Capital One Financial (-5), Priceline Group (-5), Starwood Hotels & Resorts (-5), and Whole Foods (-5) saw the largest decreases in the number of Hold ratings over this time frame. Sell Ratings: Up 9.1% The number of Sell ratings increased by 9.1% (to 685 from 628) relative to Q1. Seven sectors witnessed a rise in the number of Sell ratings, led by the Materials (+59%), Health Care (+32%), Financials (+15%), and Industrials (+14%) sectors. One sectors (Consumer Discretionary) recorded no change in the number of Sell ratings over this period. Two sectors witnessed a drop in the number of Sell ratings, led by the Telecom Services sector (-29%). At the company level in terms of Sell ratings, Mosaic (+4), Capital One Financial (+3), Helmerich & Payne (+3), and Skyworks Solutions (+3) saw the largest increases in the number of Sell ratings during the quarter, while 9 companies tied for the largest decrease (-2) in the number of Sell ratings during this time. Analysts Most Optimistic on Health Care, Least Optimistic on Energy Overall, analysts are most optimistic on the Health Care sector, based on the percentage of Buy ratings at the end of June. The Health Care sector had the highest percentage of Buy ratings (56%) at the end of Q2. Over the past twelve months, the average percentage of Buy ratings for the Health Care sector has been 60%, which is the highest of all ten sectors. On the other hand, the Utilities sector continued to have the lowest percentage of Buy ratings (34%) of any sector. Over the last twelve months, the average percentage of Buy ratings for the Utilities sector has been 37%, which is the lowest average of all ten sectors. Analysts are most pessimistic about the Energy sector, based on the percentage of Sell ratings at the end of June. The Energy sector had highest percentage of Sell ratings (10%) of all ten sectors. The average percentage of Sell ratings for the Energy sector has been 9% over the past twelve months, which is the highest average of all ten sectors. On the other hand, the Health Care sector had the lowest percentage of Sell ratings (2%). Over the last twelve months, the average percentage of Sell ratings for the Health Care sector has been 2%, which is the lowest average of all ten sectors. FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 3

4 Targets: Industry Analysts Predict Increase in S&P 500 Price Over Next 12 Months Industry Analysts Project 10.0% Increase in Price The bottom-up target price for the S&P 500 is calculated using the same methodology to calculate the price of the index, except the closing price of each company is replaced with the mean target price for each company. The mean target price for each company is then multiplied by the float shares outstanding for that company. The numbers for all the constituents are then aggregated and divided by the index divisor. At the end of the second quarter, the bottom-up target price for the S&P 500 was , which was 10.0% above the closing price for the index of Over the past twelve months, the average difference between the bottomup target price and the closing price has been 13.6%. Over the past quarter, the bottom-up target price increased by 2.3% (to from ), while the price of the index increased by 1.9% (to from ). At the end of June 2015 (one year ago), the bottom-up target price was Compared to the actual closing price of at the end of June 2016, industry analysts overestimated the price of the index by 10.3% one year ago. Over the past twelve months, the industry analysts have overestimated the price of the index at the end of each month by 9.7% on average. Over the past five years (60 months), the industry analysts have overestimated the price of the index at the end of each month by 1.6% on average. At the sector-level, the Information Technology sector had the largest upside difference between the bottom-up target price and the closing price (+16.2%), while the Telecom Services sector had the largest downside difference between the bottom-up target price and the closing price (-4.0%). FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 4

5 Ratings: Sector-Level Number of Buy, Hold, and Sell Ratings for S&P 500 (Source: FactSet) Sector Buy Hold Sell Total Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities S&P FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 5

6 Ratings: Revisions Change in Number of Buy Ratings for S&P 500: 3 Month (Source: FactSet) Sector 30-Jun Mar-16 Diff (#) Diff (%) Consumer Discretionary % Consumer Staples % Energy % Financials % Health Care % Industrials % Information Technology % Materials % Telecommunication Services % Utilities % S&P % FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 6

7 Ratings: Revisions Change in Number of Hold Ratings for S&P 500: 3 Month (Source: FactSet) Sector 30-Jun Mar-16 Diff (#) Diff (%) Consumer Discretionary % Consumer Staples % Energy % Financials % Health Care % Industrials % Information Technology % Materials % Telecommunication Services % Utilities % S&P % FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 7

8 Ratings: Revisions Change in Number of Sell Ratings for S&P 500: 3 Month (Source: FactSet) Sector 30-Jun Mar-16 Diff (#) Diff (%) Consumer Discretionary % Consumer Staples % Energy % Financials % Health Care % Industrials % Information Technology % Materials % Telecommunication Services % Utilities % S&P % FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 8

9 Ratings: Company-Level Highest % of Buy Ratings for S&P 500: Top 10 (Source: FactSet) Company Buy Hold Sell Total Broadcom Limited 97% 3% 0% 100% Newell Brands Inc 95% 5% 0% 100% Delta Air Lines, Inc. 93% 7% 0% 100% LKQ Corporation 92% 8% 0% 100% Alphabet Inc. Class A 92% 8% 0% 100% Facebook, Inc. Class A 92% 8% 0% 100% Alphabet Inc. Class C 92% 8% 0% 100% Royal Caribbean Cruises Ltd. 92% 8% 0% 100% Affiliated Managers Group, Inc. 91% 0% 9% 100% Whirlpool Corporation 91% 9% 0% 100% Highest % of Sell Ratings for S&P 500: Top 10 (Source: FactSet) Company Buy Hold Sell Total Transocean Ltd. 8% 43% 50% 100% VeriSign, Inc. 0% 63% 38% 100% Consolidated Edison, Inc. 0% 63% 37% 100% People's United Financial, Inc. 0% 64% 36% 100% Paychex, Inc. 5% 60% 35% 100% Chesapeake Energy Corporation 9% 57% 34% 100% NetApp, Inc. 5% 62% 33% 100% Diamond Offshore Drilling, Inc. 8% 58% 33% 100% Clorox Company 0% 67% 33% 100% Torchmark Corporation 0% 67% 33% 100% Highest % of Hold Ratings for S&P 500: Top 10 (Source: FactSet) Company Buy Hold Sell Total TECO Energy, Inc. 0% 100% 0% 100% AGL Resources, Inc. 0% 100% 0% 100% St. Jude Medical, Inc. 8% 92% 0% 100% Entergy Corporation 4% 91% 4% 100% Macerich Company 5% 90% 5% 100% Staples, Inc. 13% 88% 0% 100% Leggett & Platt, Incorporated 13% 88% 0% 100% KLA-Tencor Corporation 13% 87% 0% 100% Hasbro, Inc. 13% 87% 0% 100% Starwood Hotels & Resorts 14% 86% 0% 100% FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 9

10 Targets: Sector-Level Difference between S&P 500 Bottom-up Target Price & Closing Price (Source: FactSet) Sector Target Closing Diff ($) Diff (%) Consumer Discretionary % Consumer Staples % Energy % Financials % Health Care % Industrials % Information Technology % Materials % Telecommunication Services % Utilities % S&P % FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 10

11 Targets: Company-Level Difference (%) between Bottom-Up Target Price & Closing Price: Top 10 (Source: FactSet) Company Target Closing Diff ($) Diff (%) Endo International Plc % Delta Air Lines, Inc % Alexion Pharmaceuticals, Inc % Signet Jewelers Limited % United Continental Holdings, Inc % American Airlines Group, Inc % First Solar, Inc % Affiliated Managers Group, Inc % Mallinckrodt Plc % Royal Caribbean Cruises Ltd % Difference (%) between Bottom-Up Target Price & Closing Price: Bottom 10 (Source: FactSet) Company Target Closing Diff ($) Diff (%) Transocean Ltd % Hershey Company % ONEOK, Inc % Ventas, Inc % Realty Income Corporation % American Water Works Company % Paychex, Inc % Diamond Offshore Drilling, Inc % Consolidated Edison, Inc % Helmerich & Payne, Inc % Difference (%) between Bottom-Up Target Price & Closing Price: Closest to 0% (Source: FactSet) Company Target Closing Diff ($) Diff (%) Omnicom Group Inc % Republic Services, Inc % KLA-Tencor Corporation % Martin Marietta Materials, Inc % Exelon Corporation % Apache Corporation % Procter & Gamble Company % AGL Resources, Inc % Kraft Heinz Company % Fastenal Company % FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 11

12 Targets: Bottom-Up vs. Top-Down and Closing Price FactSet.com Copyright 2016 FactSet Research Systems Inc. All rights reserved. 12

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