EQUITY HIGHLIGHTS from Investment Perspectives - Hilliard Lyons
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
March 2018
E QUITY HIGHLIGHTS
from Investment Perspectives
To obtain important disclosure information
regarding Hilliard Lyons' rating system,
valuation methods, risk factors and potential
conflicts of interest with respect to the
companies covered in this report, please call
(800) 444-1854 ext. 8820, or send a request
via email to RsLib@hilliard.com. Requests
should include the name and date of this
report and a list of companies for which the
disclosure information is requested.
Note Important Disclosures on Pages 13‐14
Note Analystsʹ Certification on Page 13Equity Highlights March 2018
Six Flags Entertainment Corp. (SIX) Consumer Sector (Discretionary)
Good swap opportunity for former investors in Regal Entertainment Group
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐3 Six Flags Entertainment Corp. SIX $64.48 $70 $51 $1.25 $3.09 $2.95 21.9 4.8% $77 2/21/18
We believe Six Flags Entertainment Corp. represents an attractive equity investment, particularly for
former investors in Regal Entertainment Group. Regal, a long covered stock by the Hilliard Lyons Research
Department, was recently acquired in an all‐cash transaction. Proceeds could be invested in SIX to maintain
the attractive dividend income levels and the Entertainment & Leisure industry exposure Regal represented.
Six Flags recently produced Q4 results that exceeded our expectation. Total revenues rose 7% from the year
ago period, led by greater international licensing revenue and higher guest spending per capita. Overall
attendance was down, likely impacted by adverse weather during Q4. Still, Q4 adjusted EBITDA of $87.3
million rose 15%, exceeding our expectation by several million dollars.
We believe fundamentals are solid. We like recent growth in season pass sales, dining plans, and guest
satisfaction scores. Overall cash flows are allowing for reinvestment into the parks, dividend payments, and
share repurchases. The nascent business of collecting licensing revenue from international partners helped
the recent quarter and represents future growth potential despite some unpredictability regarding the pace
of planned projects.
We consider SIX a well‐run operator in the amusement park industry. We like the companyʹs brand equity,
portfolio of domestic properties, capital‐free international opportunities, and strong focus on shareholder
returns.
With a 4.8% current yield, SIX shares have a compelling income component. The quarterly dividend rate
was raised twice in the past several months. Annual payments are well covered by cash flows, in our view,
and we expect future annual increases at high single‐digit percentages.
We recently raised our two‐year price target on Six Flags Entertainment by $5 to $77 per share. This
increase was based on our estimate of forward results two years from now. Annualized total return
potential, including dividends, based on the current share price is in the 13‐14% range. Our suitability rating
remains 3, which is mainly based on the companyʹs leveraged balance sheet.
Please see our latest Six Flags Entertainment Corp. report dated February 21, 2018.
Hilliard Lyons Equity Research 2 From Investment PerspectivesEquity Highlights March 2018
The Procter & Gamble Co. (PG) Consumer Sector (Staples)
Road to improvement has started, in our view
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐1 The Procter & Gamble Co. FY(6) PG $79.16 $95 $78 $3.67 $3.92 $4.20 18.8 3.5% $106 1/24/18
Procter & Gamble Co.ʹs fiscal Q2 results were encouraging to us. Net sales for the period ended 12/31/2017
rose 3% to $17.395 billion, matching the street consensus figure and slightly surpassing our estimate. Organic
sales rose 2% due to higher volume, as overall pricing was slightly negative (mostly in the Grooming
segment).
Core EPS rose faster than sales. Core gross margin (excluding nonrecurring items) decreased 80 basis points
due to higher commodity costs, mix, and pricing. Core operating margin dropped only 10 basis points,
benefiting from cost reduction initiatives. Recently enacted tax legislation resulted in a $0.05 benefit to core
EPS. Share repurchases also helped the EPS calculation. Core EPS of $1.19 exceeded the year ago figure of
$1.08, a 10% gain. This represented sequential improvement from the fiscal Q1 EPS gain of 6%.
Managementʹs outlook for FYʹ18 was little changed. Guidance included expected organic sales growth of 2‐
3% for the fiscal year (June period end) and all‐in sales growth of 3%. Margins are expected to improve in
2H. With continued share repurchases, this is expected to produce annual core EPS growth of 5‐8%, slightly
above the previous guided range of 5‐7%. We recently fine‐tuned our annual EPS outlook, which included a
$0.03 increase to $4.20.
PGʹs Board composition is finally set. In December 2017, following a lengthy and costly proxy battle for
Board seats, PG announced the addition of activist shareholder Nelson Peltz as its 12th Director. In a bit of a
surprise move, PG also added seasoned business executive Joseph Jimenez as its 13th Director.
We rate Procter & Gamble Long‐term Buy. We believe an earnings rebound is underway, slowed by macro
and industry factors. We recently raised our two‐year price target by $1 to $106 per share to reflect slightly
higher forward earnings given the progression of time. We also note PGʹs above average dividend yield,
recently 3.5%. Our suitability rating is 1.
Please see our latest Procter & Gamble Co. report dated January 24, 2018.
Hilliard Lyons Equity Research 3 From Investment PerspectivesEquity Highlights March 2018
German American Bancorp (GABC) Financial Sector
Best in class commercial banking organization
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
Ntrl‐3 German American Bancorp, Inc. (P) GABC $35.10 $39 $29 $1.82 $1.68 $2.02 17.4 1.7% $34 1/31/18
German American Bancorp, Inc. is a commercial banking organization headquartered in Jasper, IN. The
company operates 53 retail and commercial banking offices throughout southern Indiana. GABC also owns a
trust, brokerage, and financial planning subsidiary (German American Financial Advisors & Trust
Company) and a full line property and casualty insurance agency (German American Insurance, Inc.).
Loan Growth: German American generated end‐of‐period loan growth of 8.3%, 8.0%, and 7.1% in 2015, 2016,
and 2017, respectively. GABCʹs ability to consistently generate robust loan growth should more than offset
any net interest margin pressure the company may experience.
Asset Quality: GABC has been able to generate strong loan growth without sacrificing asset quality.
Nonperforming Assets/Assets have remained low, rising four bps LQ in Q4ʹ17 to 0.36% versus 0.62% for
other small‐cap banks. Loss content has been negligible with net charge‐offs equal to 0.04% of average loans
in 2017, and was below 0.05% in each of the last four years.
Earnings & Profitability: GABC reported operating EPS of $1.68 in 2017, and has achieved a 6.8%
compound annual growth rate (CAGR) in EPS over the past five years. As a measure of the returns
management is generating for shareholders, GABC has maintained a return on equity in excess of 10% over
the past 13 years, including during the financial crisis.
Dividends: Nearly in line with the companyʹs earnings growth, GABCʹs dividend has grown at a 6.3%
CAGR over the last five years. In conjunction with Q4ʹ17 earnings results, German American announced a
15% increase in the quarterly cash dividend to $0.15 per share.
We currently rate GABC Neutral as we believe the companyʹs strong fundamentals are fully reflected in
its valuation.
Please see our latest German American Bancorp report dated January 31, 2018.
Hilliard Lyons Equity Research 4 From Investment PerspectivesEquity Highlights March 2018
Eli Lilly & Co. (LLY) Health Care Sector
Market emotions create investment opportunity
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐1 Eli Lilly & Company LLY $77.44 $89 $74 $3.52 $4.28 $4.82 16.1 2.9% $104 2/1/18
The focus of the most recent quarterly earnings call for Eli Lilly & Co. was on Ozempic (semaglutide), the
new GLP‐1 drug (the same mechanism of action as Trulicity) from Novo Nordisk (NVO‐$50.63). As we
have noted before, we believe Ozempic presents a problem to the incredible growth and market share gains
of Trulicity. However, we do buy managementʹs argument that the class growth of the GLP‐1 market (still
less than 30% versus the basal insulin market) will enable Trulicity to continue growing. Furthermore,
management noted there were minimal switches from Victoza (Novoʹs earlier generation GLP‐1) to Trulicity.
Some Q&A time ‐‐ and we believe the source of market overreaction ‐‐ was also spent on the potential of
an oral version of semaglutide that could hit the market next year if trials churn out positive results.
Whereas management generally acknowledged the competitive threat from Ozempic (the injectable), they
seemed to reject the threat of an oral version that could present side effect and fasting requirements.
Each situation is different in terms of the patientʹs involvement in therapeutic choice, but we believe the
oral versus subcutaneous option will be substantially driven by the patient. We therefore expect oral
semaglutide to carve out a dedicated but small niche among those wanting to avoid injections at all cost, and
we believe Novoʹs attempt to position it earlier in the treatment line will be a longer‐term proposition ‐‐ one
that could ultimately be null and void if Lillyʹs Jardiance churns out more data on cardiovascular benefits.
We note we had already adjusted our model after Ozempic safety data came in better than expected and
are a bit surprised by the delayed reaction of the market. In our opinion, based on Q&A and the price
action following otherwise strong earnings, we believe the market is focusing far too much on these
competitive threats while ignoring Lillyʹs pipeline, including what could be a great counter punch from a
GIP/GLP‐1 co‐agonist. We are especially skeptical of the market share an oral semaglutide could take.
Please see our latest Eli Lilly & Co. report dated February 1, 2018.
Hilliard Lyons Equity Research 5 From Investment PerspectivesEquity Highlights March 2018
Multi‐Color Corp. (LABL) Industrials Sector
Growing pains in Q3, but thesis intact
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐3 Multi‐Color Corp. FY(3) LABL $68.25 $90 $62 $3.22 $3.61 $3.64 18.8 0.3% $105 2/6/18
Cincinnati, OH‐based Multi‐Color Corp., established in 1916, is a global leader in labeling solutions.
LABL supports prominent brands selling a range consumer products across six continents, and employs
~4600 associates.
We reiterated our Long‐term Buy‐rating on LABL in early February. LABL fits our affinity for consumer‐
oriented industrial exposure as we work into 2018, and longer term we see sentiment/valuation as
compelling versus the growth we expect over the next couple of years.
LABL reported fiscal Q3ʹ18 (quarter ending 12/31/2017) core EPS of $0.72. Earnings per share missed
consensus, but nonetheless expanded 1.9% from $0.70 in the year‐ago period with despite substantially
higher shares outstanding.
Revenues in fiscal Q3ʹ18 were $353 million, up 67%, reflecting the Constantia acquisition that closed on
October 31st. That said, integration and execution items impacted margins, although this is suggested to
normalize over the course of 2018. Organic sales grew 7% in the period, the strongest rate across the four
quarters of calendar 2017.
We estimate Procter and Gamble (PG‐$79.16) accounted for ~13% of sales in the most recent quarter. We
believe this relationship serves as a good proxy for LABL performance, although the Constantia acquisition
has modestly diluted reliance on P&G.
Multi‐Color suggested its low end of fiscal 2018 EPS guidance ($3.80) may be difficult to attain. Our
current 2018E EPS sits at $3.64, a few cents above the prior year. Nonetheless, LABLʹs fiscal 2019 begins on
April 1st of this year, and we see a substantial reacceleration of growth in the out year.
Please see our latest Multi‐Color Corp. report dated February 6, 2018.
Hilliard Lyons Equity Research 6 From Investment PerspectivesEquity Highlights March 2018
Intel Corp. (INTC) Information Technology Sector
Recent price target increase
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐2 Intel Corp. INTC $51.32 $51 $33 $2.72 $3.47 $3.55 14.5 2.3% $60 1/26/18
As we have previously noted, we believed the Intel Corp. chip security issue at the beginning of 2018
presented a buying opportunity ahead of Intelʹs Q4 earnings report on January 25th. INTC reported strong
Q4 results, significantly raised their outlook, and boosted the dividend 10%.
Following the earnings report, we increased our price target to $60 from $52.50 as we expect new growth
markets to aid Intelʹs turnaround strategy. Following these actions, the stock market sold off in early
February, correspondingly Intel shares declined to $42.50 from a post earnings report high of $50.11. A rally
in INTC shares still leaves potential upside of 18% remaining to our $60 price target.
Our longer‐term outlook is for $4 in EPS by 2020. We want to note our suitability rating of 2 which we view
as appropriate given Intelʹs transition to a data oriented company away from PC specific chip designs.
Investment Thesis: Intelʹs strategic vision is transitioning from a PC centric chipmaker to a company
focused on empowering a data driven economy. The coming rollout of the 5G network in 2018/2019 will
drastically increase the amount, speed, and complexity of data requirements. Intel has a monopolistic 98%
share of the server market, the backbone of the digital economy.
Intelʹs pole position in the data center will allow it to better connect to smart connected end devices
including PCs, smartphones, autonomous cars, automated factories, and health information better known
as the Internet of Things. New experiences such as artificial intelligence, augmented reality, and the 5G
network are expected to increase semiconductor demand over the next decade.
Global semiconductor revenue is at an all‐time. Intel is also entering new ancillary markets including
memory, FPGAs, and autonomous driving systems. These growth markets are growing at double‐digit rates
for Intel and now represent roughly 50% of revenue.
Please see our latest Intel Corp. report dated January 26, 2018.
Hilliard Lyons Equity Research 7 From Investment PerspectivesEquity Highlights March 2018
National Health Investors, Inc. (NHI) Real Estate Sector
Recently upgraded to Long‐term Buy
P/FFO
Rating ‐ Price Year Year ‐‐‐‐‐ FY FFO ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐2 National Health Investors, Inc. * (U) NHI $68.30 $82 $63 $4.87 $5.29 $5.52 12.4 5.9% $77 2/16/18
National Health Investors, Inc., headquartered in Murfreesboro, TN, is a real estate investment trust
(REIT) with investments in more than 210 healthcare facilities located in 32 states.
On February 16th we upgraded NHI to Long‐term Buy from Neutral with a 2‐3 year price target of $77 per
share. In our opinion, the companyʹs recent acquisition activity has increased the overall value of the firm.
We believe the forward outlook for the company is now solidly better than that of the peer group, in spite of
the shares trading at discount.
NHI reported Q4ʹ17 results that beat our expectations. Q4 normalized FFO was $1.35 per share, above our
and the consensus estimate, and above $1.27 per share reported in Q4ʹ16. Recent acquisitions and ordinary
rental escalators led to an 11.5% increase in rental income. Total investment for the quarter was $49.9 million.
The coverage ratios of National Health Investorsʹs portfolio remains very strong and generally better than
its peers at 1.66 times. The coverage of its skilled nursing properties are especially strong at 2.52 times,
driven by its major tenant National Healthcare (NHC‐$60.70), which has continued to hold a very strong
coverage level. The coverage rate on its senior housing portfolio is closer to its peers at 1.21 times. As with
other companies, management mentioned on the call that they are seeing pressure from increased labor costs
and move‐outs, although also noting their portfolio has weathered these issues with stable coverage and
occupancy metrics.
Managementʹs 2018 FFO per share guidance range is $5.45 to $5.51. Guidance does not include the impact
of any additional activity other than what was already announced and those which management has a
strong belief will occur under existing agreements. Our estimates include an additional $100 million
investments, leading to our above guidance number of 2018 FFO per share of $5.52.
* ‐ Annual yield is calculated by dividing the distribution amount by the current market price of the security.
For US income tax purposes, the Company may classify all or a portion of its distributions as dividends or
other non‐dividend distributions. Note that for some investors, for US income tax purposes all or a portion
of the Companyʹs 2017 dividend or distribution was treated as return of capital and not as ʺdividend incomeʺ
as reflected on the IRS Form 1099‐Div for the 2017 tax year. The Company generally makes a final
determination regarding the proper tax treatment of distributions after calendar year end. We urge each
shareholder to consult with his or her own tax advisor to determine the tax consequences of the distributions
received, including any state, local or foreign tax considerations.
Please see our latest National Health Investors, Inc. report dated February 16, 2018.
Hilliard Lyons Equity Research 8 From Investment PerspectivesEquity Highlights March 2018
AT&T Inc. (T) Telecommunications Sector
Solid Q4 results
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
Buy‐2 AT&T Inc. (H) (I) T $36.91 $43 $33 $2.84 $3.05 $3.50 10.5 5.4% $43 2/1/18
We are maintaining our Buy rating on AT&T Inc. The company reported 2017 earnings of $3.05 per share
versus $2.84 per share in 2017. However, earnings benefited from a $0.13 per share gain from lower taxes.
Without that benefit earnings would have been $2.92 per share compared to $2.84 per share, a more modest
gain of nearly 3%.
Fourth quarter revenue was $41.7 billion and above the consensus estimate of $41.2 billion. This was
significant, in our view, as more often than not in recent yearsʹ Tʹs revenue have fallen below expectations.
The better than anticipated revenue was helped by strength in its wireless additions. The company added
329,000 postpaid wireless customers in the fourth quarter, its best result in several years and well above
expectations of a loss of 30,000 customers.
Management introduced 2018 guidance with an earnings expectation of $3.50 per share. Earnings are
expected to benefit by $0.45 per share from tax reform. Free cash flow is anticipated to be about $21 billion
and capex is expected to total $25 billion.
We continue to recommend AT&T because the stock trades at just ~10.5x estimated 2018 earnings of $3.50
per share and an offers an attractive 5.4% dividend yield. Nonetheless, the stock may remain in essentially
a holding pattern until after the companyʹs legal battle with the government over Time Warner is settled in
late April or early May.
Please see our latest AT&T Inc. report dated February 1, 2018.
Hilliard Lyons Equity Research 9 From Investment PerspectivesEquity Highlights March 2018
CMS Energy (CMS) Utilities Sector
Rating recently upgraded to Long‐term Buy
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
LTB‐2 CMS Energy CMS $42.49 $51 $40 $2.02 $2.17 $2.33 18.2 2.7% 2/15/18
We recently upgraded rating on CMS Energy to Long‐term Buy. CMS is a large utility that provides
electricity to 1.8 million customers and natural gas to 1.7 million customers in Michigan.
This is a company weʹre quite familiar with and have recommended a number of times over the years.
CMS generates the most consistent results of any electric utility in our coverage list. The company has
delivered 15 consecutive years of 7% earnings growth. Not only is this an above industry average growth
rate, but the company has been able to achieve this in all types of economic environments as well as differing
political administrations at both the federal and state level.
We upgraded our rating for several reasons. First, the stock has pulled back 16% from its 52‐week high, well
beyond the broader marketʹs pullback. While we believe this is a function of interest rate fears and group
rotation, the companyʹs fundamentals have not changed and are just as positive as they have ever been, in
our view.
CMS continues to expect to grow both its earnings and dividends by a 5% to 7% annual rate. We have a
high level of confidence in CMSʹs ability to achieve this growth. Our view is that the market will eventually
recognize and reward CMS for its good results with a higher stock price. We regard CMS as a core utility
holding.
Please see our latest CMS Energy report dated February 15, 2018.
Hilliard Lyons Equity Research 10 From Investment PerspectivesEquity Highlights March 2018
Atmos Energy Corp. (ATO) Utilities Sector
Strong fiscal Q1; recent news
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
Ntrl‐1 Atmos Energy Corp. FY(9) ATO $79.46 $94 $76 $3.41 $3.61 $4.02 19.8 2.4% 2/7/18
Headquartered in Dallas, TX, Atmos Energy Corp. is the largest fully regulated natural gas distributor in
the US, with customers in nine states. It also manages company owned natural gas storage and pipeline
assets, including Atmos Pipeline Texas, one of the largest intrastate pipe networks in Texas.
We reiterated our Neutral rating on shares of Atmos in early February. We view ATO as a preferred core
holding in the gas space, with strong operational execution and ʹfullʹ regulatory calendar in the year ahead.
That said, we continue to wait for a more compelling entry point.
Atmos reported fiscal Q1ʹ18 (October‐December) adjusted EPS from continuing ops of $1.40 versus $1.08
in Q1ʹ17. Results beat our street‐high estimate of $1.16 by $0.24, although we estimate about half of the beat
was driven by unadjusted‐for one‐time tax items. Nonetheless, consolidated gross margins grew at the best
rate in three years on a mix of favorable weather comps and regulatory items.
The company completed a $400 million secondary equity offering in late November. We estimate the
offering price at about $87.75 per share; with an element of hindsight, the deal seems to have been quite
fortuitous from a timing standpoint. The impact of dilution will be a headwind for EPS this year, but this is
accounted for in both 2018 EPS guidance and stretch guidance targets.
ATO recently suffered an explosion in the Dallas area. The incident tragically killed a 12 year old girl, and
led the company to temporarily suspend service for 2,800 customers, as portion of the system will require
full replacement. Near‐term financial impacts are hard to quantify; in the absence of explicit company
wrongdoing, we do not expect these types of events to damage the company long term.
Please see our latest Atmos Energy Corp. report dated February 7, 2018.
Hilliard Lyons Equity Research 11 From Investment PerspectivesEquity Highlights March 2018
Aqua America, Inc. (WTR) Utilities Sector
Good Q4 from WTR, but soft guide for 2018
P/E
Rating ‐ Price Year Year ‐‐‐‐‐ FY EPS ‐‐‐‐‐ Ratio Ind. Div. Target Latest
Suit. Company Symbol 03/07/18 High Low 2016 2017 2018E 2018E Yield Price Report
Ntrl‐2 Aqua America, Inc. WTR $33.43 $40 $30 $1.32 $1.36 $1.41 23.7 2.4% 2/28/18
Aqua America, Inc. is a water and wastewater utility holding company with operating subsidiaries
serving ~3 million people. WTR provides regulated service to customers in Pennsylvania, Ohio, North
Carolina, Illinois, Texas, New Jersey, Indiana, and Virginia. The companyʹs history spans over 125 years.
We reiterated our Neutral rating on WTR in late February. Our rating is primarily driven by valuation,
where, similar to most peers, we see Aqua as fully valued. We hold a positive view toward core operations
on a long‐term basis, which includes a strong regulatory framework in Pennsylvania.
The company hosted an analyst day at the NYSE in conjunction with releasing Q4ʹ17 results. Adjusted
EPS for the quarter beat both our estimate and consensus, and grew $0.04 year/year to $0.32. That said, full
year adjusted EPS grew just 3.6% compared to 2016, a 4th consecutive year of growth that was sub‐5%.
WTR plans to spend $1.4 billion in infrastructure improvements from 2018 to 2020. This range was
increased slightly in recent weeks, and included planned Cap Ex this year of $500 million; Aqua invested
nearly $480 million in 2017, which we believe to be a high watermark for the company.
Aqua completed only four acquisitions in 2017. Completed M&A activity continues to be disappointing, in
our view, although management still cites a constructive long‐term outlook. The company guided to 2018
customer growth in the range of 2% to 3%, with some of 2017ʹs expected growth via deal flow being pushed
into the current year.
2018 EPS guidance was initiated as a range of $1.37 to $1.44. Prior consensus for the year fell above this
range, but has sense skewed a bit lower to $1.40.
Please see our latest Aqua America, Inc. report dated February 28, 2018.
Hilliard Lyons Equity Research 12 From Investment PerspectivesEquity Highlights March 2018
Additional information, including a report on each common stock mentioned, is available upon request. Check with
your Financial Consultant for the investment appropriate for you.
Explanations & Disclaimers
A ‐ Actual
Ann. ‐ Annual/annualized
Bps ‐ Basis points
E ‐ Estimated
EBITDA ‐ Earnings before income, taxes, depreciation, amortization
EBITDDA ‐ Earnings before income, taxes, depreciation, depletion, amortization
EPS ‐ Earnings per share
EV ‐ Enterprise value
FFO ‐ Funds from operations
FFOA ‐ Funds from operations adjusted
FFOM ‐ Funds from operations modified
FY ‐ Fiscal year
FY(1‐11) ‐ EPS are for fiscal years (1=January, 2=February, etc.)
GAAP ‐ Generally accepted accounting principles
Ind. Div. Yield ‐ Indicated dividend yield
NA ‐ Not available/acceptable
NAV ‐ Net asset value
NM ‐ Non‐meaningful
P/E ‐ Price/earnings ratio ‐‐ current price divided by EPS
Q ‐ Quarter
(1‐4)Q ‐ 1=First quarter, 2=Second quarter, 3=Third quarter, 4=Fourth quarter
REIT ‐ Real estate investment trust
TR ‐ Total return
TTM ‐ Trailing twelve months
YTD ‐ Year to date
All data is adjusted for stock splits or stock dividends.
Unless otherwise noted, EPS are from continuing operations and exclude non‐recurring items.
We recognize each clientʹs investment needs and goals are different. Opinions expressed are subject to
change without notice and do not take into account the particular investment objectives, financial situation,
or needs of individual investors.
Analystsʹ Certification
The contributors to this report hereby certify that the views expressed in this report accurately reflect their
personal views about the subject. They also certify that they have not been, are not, and will not be receiving
direct or indirect compensation in exchange for expressing the specific points of view in this report.
Important Disclosures
The contributors to this report or members of their households typically have positions in the companies
they follow, which may include, but are not limited to, common stock, options, rights, warrants, or futures
contracts. They may not engage in buying or selling securities contrary to their recommendation.
Hilliard Lyons Equity Research 13 From Investment PerspectivesEquity Highlights March 2018
Hilliard Lyonsʹ analysts receive bonus compensation based on Hilliard Lyonsʹ profitability. They do not
receive direct payments from investment banking activity.
H ‐ Hilliard Lyons has received investment banking compensation from AT&T Inc. within the past 12
months.
I ‐ Hilliard Lyons has been a manager or co‐manager of an offering of securities of AT&T Inc. within the past
12 months.
P ‐ German American Bancorp is/was a client of Hilliard Lyons within the past 12 months, received non‐
investment banking securities‐related services, and Hilliard Lyons received compensation for those services.
U ‐ Hilliard Lyonsʹ customers owned at least 5% of National Health Investors, Inc.ʹs common stock
outstanding as of March 7, 2018.
Investment Ratings
Buy: We believe the stock has significant total return potential in the coming 12 months.
Long‐term Buy: We believe the stock is an above average holding in its sector, and expect solid total returns
to be realized over a longer time frame than our Buy rated issues, typically 2‐3 years.
Neutral: We believe the stock is an average holding in its sector, is currently fully valued, and may be used
as a source of funds if better opportunities arise.
Underperform: We believe the stock is vulnerable to a price set back in the next 12 months.
Suitability Ratings
1 ‐ A large cap, core holding with a solid history. 2 ‐ A historically secure company which could be cyclical,
has a shorter history than a ʺ1ʺ or is subject to event driven setbacks. 3 ‐ An above average risk/reward ratio
could be due to small size, lack of product diversity, sporadic earnings or high leverage. 4 ‐ Speculative, due
to small size, inconsistent profitability, erratic revenue, volatility, low trading volume or a narrow customer
or product base.
Hilliard Lyons Investment Banking
Recommended Issues Provided in Past 12 Mo.
# of % of
Rating Stocks Covered Stocks Covered Banking No Banking
Buy 37 33% 11% 89%
Hold/Neutral 69 62% 9% 91%
Sell 5 5% 0% 100%
As of 8 March 2018
Hilliard Lyons Equity Research 14 From Investment PerspectivesEquity Highlights March 2018
Other Disclosures
Opinions expressed are subject to change without notice and do not take into account the particular
investment objectives, financial situation or needs of individual investors. Employees of J.J.B. Hilliard, W.L.
Lyons, LLC or its affiliates may, at times, release written or oral commentary, technical analysis or trading
strategies that differ from the opinions expressed here.
J.J.B. Hilliard, W.L. Lyons, LLC is a multi‐disciplined financial services firm that regularly seeks investment
banking assignments and compensation from issuers for services including, but not limited to, acting as an
underwriter in an offering or financial advisor in a merger or acquisition, or serving as placement agent in
private transactions.
The information herein has been obtained from sources we believe to be reliable but is not guaranteed and
does not purport to be a complete statement of all material factors. This is for informational purposes and is
not a solicitation of orders to purchase or sell securities. Reproduction is forbidden unless authorized. All
rights reserved.
Hilliard Lyons Equity Research 15 From Investment PerspectivesYou can also read
