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					                                          Americas Morning Summary
                                          October 20, 2010



The Goldman Sachs Group, Inc.
                                           Focus Items
This document contains comments
related to the following stocks:           Americas: Retail: The new retail life cycle - focus on capital allocation                                                       1
                                           Americas: Consumer Staples: Buy MJN, HANS, and LO with M&A picking up;
                                                                                                                                                                           2
Agilent Technologies (A)                   upside to TUP on increased cash returns
Altera Corp. (ALTR)                        UnitedHealth Group (UNH): The next six weeks will drive the 2011-2013 earnings
America Movil (AMX)                                                                                                                                                        3
American Electric Power (AEP)              view
Axtel (AXTELCPO.MX)                        Intuitive Surgical, Inc. (ISRG): Slowing system sales/procedure volumes drive 3Q
Banco Compartamos                                                                                                                                                          4
                                           revenue shortfall
(COMPARTO.MX)
Bank of America Corporation (BAC)          Yahoo! Inc. (YHOO): Stuck in land of single-digit revenue growth for a few more
Bed Bath & Beyond, Inc. (BBBY)                                                                                                                                             5
                                           quarters
Boston Scientific Corp. (BSX)
CBS Corp. (CBS)
CIGNA Corp. (CI)                           Key Data Changes
The Coca-Cola Company (KO)
Crown Holding, Inc. (CCK)                  Investment List Additions
The Walt Disney Company (DIS)              Company                                          Ticker                             Investment List Additions
Eli Lilly & Company (LLY)                  NII Holdings                                     NIHD                                      Americas Buy List
Forest Laboratories, Inc. (FRX)
Grupo Televisa (TV)                        Rating and price target changes
Harley-Davidson, Inc. (HOG)
                                                                                       Rating/
Illinois Tool Works (ITW)                                                           Coverage view
                                                                                                                Price Target                           Estimates
International Game Technology              Company                       Ticker      New     Old       New           Old       % chg Current Year Next Year Fiscal y/e
(IGT)                                      America Movil                  AMX        N/C    unch     ↑ $59.30      $57.00       4.0%          $3.60        $4.37     Dec
Intuitive Surgical, Inc. (ISRG)
Johnson & Johnson (JNJ)                    Axtel                      AXTELCPO.MX    S/C    unch     ↓ P$7.10      P$7.30      (2.7%)       (P$0.20)      (P$0.01)   Dec
Juniper Networks, Inc. (JNPR)              Bed Bath & Beyond, Inc.       BBBY        N/N    unch     ↑ $50.00      $49.00       2.0%          $2.86        $3.24     Feb
Kohl's Corp. (KSS)
LLX Logistica (LLXL3.SA)                   Boston Scientific Corp.        BSX        S/N    unch      ↑ $5.50       $5.25       4.8%          $0.38        $0.41     Dec
Lockheed Martin Corp. (LMT)                Crown Holding, Inc.            CCK        B/N    unch     ↑ $36.00      $33.00       9.1%          $2.25        $2.80     Dec
Megacable (MEGACPO.MX)
                                           Grupo Televisa                 TV         N/C    unch     ↑ $22.50      $22.00       2.3%          $1.07        $1.26     Dec
MGM Resorts International (MGM)
Microsoft Corp. (MSFT)                     Intuitive Surgical, Inc.      ISRG        S/N    unch     ↓ $240.00 $270.00 (11.1%)                $8.72        $9.89     Dec
Mylan Inc. (MYL)                           LLX Logistica                LLXL3.SA     N/A    unch     ↑ R$9.60      R$9.50       1.1%        (R$0.15)      (R$0.40)   Dec
NET (NETC4.SA)
The News Corp. (A) (NWS__A)                Lockheed Martin Corp.          LMT        S/C    unch     ↓ $63.00      $65.00      (3.1%)         $7.00        $6.25     Dec
The News Corp. (B) (NWS)                   Megacable                  MEGACPO.MX     S/C    unch     ↓ P$26.50 P$26.80         (1.1%)        P$1.91       P$1.87     Dec
NII Holdings (NIHD)
                                           NII Holdings                  NIHD       ↑ B/C    N/C      $47.90        unch         --           $2.17        $2.78     Dec
Occidental Petroleum Corp. (OXY)
Oi (Telemar) (TNLP4.SA)                    Oi (Telemar)                TNLP4.SA      N/C    unch     ↓ R$28.00 R$28.30         (1.1%)        R$4.27       R$4.68     Dec
Parker Hannifin Corp. (PH)                 Parker Hannifin Corp.          PH         N/A    unch     ↑ $92.00      $76.00      21.1%          $6.05        $7.10     Jun
Peabody Energy Corp. (BTU)
Scripps Networks Interactive, Inc.         Solera Holdings, Inc.          SLH        N/N    unch     ↑ $46.00      $43.00       7.0%          $1.55        $1.85     Jun
(SNI)                                      Stryker Corp.                  SYK        N/N    unch     ↑ $54.00      $53.00       1.9%          $3.31        $3.66     Dec
Solera Holdings, Inc. (SLH)
For further product information,
contact:

New York Investment Research
(212) 902-1000
                                           The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research
Analysts employed by non-US                reports. As a result, investors should be aware that the firm may have a conflict of interest that could
affiliates are not registered/qualified    affect the objectivity of this report. Investors should consider this report as only a single factor in making
as research analysts with FINRA in         their investment decision. For Reg AC certification, see the end of the text. Other important disclosures
the U.S.                                   follow the Reg AC certification, or go to www.gs.com/research/hedge.html. This report is intended for
                                           distribution to GS institutional clients only.
Global Investment Research
Steel Dynamics Inc. (STLD)       Telecom Argentina               TEO       N/C     unch     ↑ $22.30    $21.50     3.7%        $2.48             $2.43      Dec
Stryker Corp. (SYK)
Telecom Argentina (TEO)          Telesp                       TLPP4.SA     N/C     unch    ↑ R$45.60 R$43.30       5.3%       R$4.65           R$4.81       Dec
Telesp (TLPP4.SA)
Telmex (TMX)                     Estimate changes
Texas Instruments Inc. (TXN)                                                Rating/               Current Year                       Next Year              Fiscal
                                                                           Coverage                                                                          y/e
TIM Brazil (TCSL4.SA)            Company                        Ticker       view           New         Old      % chg      New          Old       % chg
Time Warner Inc. (TWX)
                                 Altera Corp.                   ALTR         N/A           ↑ $2.46     $2.40     2.6%      $2.10        unch         --     Dec
Tupperware Brands Corp. (TUP)
UnitedHealth Group (UNH)         America Movil                   AMX         N/C           ↑ $3.60     $3.14     14.6%    ↑ $4.37       $3.88      12.5%    Dec
Viacom Inc. (VIA__B)             American Electric Power         AEP         N/N           ↓ $3.05     $3.09     (1.2%)   ↑ $3.17       $3.13      1.2%     Dec
Vivo (VIVO4.SA)
Waste Connections, Inc. (WCN)    Axtel                       AXTELCPO.MX     S/C          ↑ (P$0.20) (P$0.21)    3.4%     (P$0.01)      unch         --     Dec
Weatherford International Ltd.   Bed Bath & Beyond, Inc.        BBBY         N/N            $2.86      unch        --     ↑ $3.24       $3.22      0.5%     Feb
(WFT)
                                 Boston Scientific Corp.         BSX         S/N           ↑ $0.38     $0.33     14.0%    ↑ $0.41       $0.39      3.9%     Dec
Yahoo! Inc. (YHOO)
                                 The Coca-Cola
                                                                 KO          B/A           ↓ $3.50     $3.53     (0.6%)   ↑ $3.90       $3.88      0.4%     Dec
                                 Company
                                 Crown Holding, Inc.             CCK         B/N           ↓ $2.25     $2.28     (1.5%)    $2.80        unch         --     Dec
                                 Forest Laboratories, Inc.       FRX         N/N           ↑ $3.95     $3.84     2.9%     ↓ $4.30       $4.32      (0.5%)   Mar
                                 Grupo Televisa                  TV          N/C           ↓ $1.07     $1.10     (2.2%)   ↓ $1.26       $1.29      (2.1%)   Dec
                                 Harley-Davidson, Inc.          HOG          S/A           ↑ $1.29     $1.10     17.1%    ↑ $2.22       $2.16      2.5%     Dec
                                 Illinois Tool Works             ITW         N/A           ↑ $3.12     $3.10     0.5%     ↑ $3.70       $3.60      2.8%     Dec
                                 Intuitive Surgical, Inc.       ISRG         S/N           ↓ $8.72     $8.76     (0.4%)   ↓ $9.89      $10.02      (1.3%)   Dec
                                 Johnson & Johnson               JNJ         N/N           ↑ $4.76     $4.71     1.2%     ↓ $4.90       $5.06      (3.1%)   Dec
                                 Juniper Networks, Inc.         JNPR         B/N            $1.00      unch        --     ↑ $1.36       $1.35      1.0%     Dec
                                 LLX Logistica                 LLXL3.SA      N/A          ↑ (R$0.15) (R$0.17) 10.2% ↑ (R$0.40) (R$0.43)            7.2%     Dec
                                 Lockheed Martin Corp.           LMT         S/C            $7.00      unch        --     ↓ $6.25       $6.50      (3.8%)   Dec
                                 Megacable                   MEGACPO.MX      S/C          ↓ P$1.91     P$1.98    (3.5%)   ↓ P$1.87     P$1.97      (5.3%)   Dec
                                 NET                          NETC4.SA       N/C          ↑ R$0.82     R$0.75    9.0%     ↓ R$1.03     R$1.05      (1.1%)   Dec
                                 Occidental Petroleum
                                                                 OXY         B/A           ↑ $5.93     $5.80     2.3%     ↑ $9.40       $9.25      1.6%     Dec
                                 Corp.
                                 Oi (Telemar)                 TNLP4.SA       N/C          ↑ R$4.27     R$4.19    1.9%     ↓ R$4.68     R$4.95      (5.4%)   Dec
                                 Parker Hannifin Corp.           PH          N/A           ↑ $6.05     $4.95     22.3%    ↑ $7.10       $6.00      18.4%    Jun
                                 Peabody Energy Corp.            BTU         B/A           ↑ $3.12     $3.06     1.9%     ↓ $4.61       $4.63      (0.4%)   Dec
                                 Solera Holdings, Inc.           SLH         N/N           ↑ $1.55     $1.47     5.4%     ↑ $1.85       $1.74      6.7%     Jun
                                 Steel Dynamics Inc.            STLD         B/N           ↑ $0.65     $0.62     4.6%      $2.00        unch         --     Dec
                                 Stryker Corp.                   SYK         N/N           ↑ $3.31     $3.29     0.7%     ↑ $3.66       $3.62      1.3%     Dec
                                 Telecom Argentina               TEO         N/C           ↑ $2.48     $2.47     0.2%     ↓ $2.43       $2.46      (1.3%)   Dec
                                 Telesp                       TLPP4.SA       N/C          ↓ R$4.65     R$4.73    (1.8%)   ↓ R$4.81     R$4.96      (3.0%)   Dec
                                 Telmex                          TMX         N/C           ↑ $1.44     $1.43     0.2%     ↓ $1.49       $1.52      (1.8%)   Dec
                                 TIM Brazil                   TCSL4.SA       B/C          ↓ R$0.16     R$0.17    (8.7%)   ↓ R$0.39     R$0.40      (2.7%)   Dec
                                 UnitedHealth Group              UNH         B/A           ↑ $4.00     $3.65     9.5%      $3.75        unch         --     Dec
                                 Vivo                         VIVO4.SA       B/C          ↓ R$3.92     R$3.98    (1.7%)   ↓ R$6.04     R$6.20      (2.6%)   Dec
                                 Weatherford
                                                                 WFT         N/N           ↓ $0.59     $0.61     (3.7%)   ↑ $1.20       $1.17      1.9%     Dec
                                 International Ltd.
                                 Yahoo! Inc.                    YHOO         N/A           ↓ $0.89     $0.92     (2.7%)   ↓ $1.09       $1.10      (1.0%)   Dec


                                 Other Headlines
                                 Options Research
                                 Weekly Options Watch: Earnings Focus: TXN, MGM, IGT, A, AMGN, CI, MSFT, MYL, KSS                                                    6

                                 Basic Materials
Steel Dynamics Inc. (STLD): Best value among steel producers; appealing valuations - Buy             7

Consumer Cyclicals
Harley-Davidson, Inc. (HOG): A well executed quarter; but still see risk/reward as unfavorable       8
Americas: Entertainment: TV Ratings Monitor: FOX comes close but fails to break CBS's streak         9
Bed Bath & Beyond, Inc. (BBBY): Updating BBBY estimates and price target                            10

Consumer Staples
Tupperware Brands Corp. (TUP): First Take: Stock likely to dip on moderate sales shortfall; still
                                                                                                    11
Buy
The Coca-Cola Company (KO): Solid fundamentals continue; buyback announcement next
                                                                                                    12
catalyst

Energy
Occidental Petroleum Corp. (OXY): Buy on the dip; pullback appears unwarranted                      13
Peabody Energy Corp. (BTU): Remains our favorite coal stock on organic growth + JV upside;
                                                                                                    14
Buy
Weatherford International Ltd. (WFT): WFT's 3Q reminds us the road to recovery can be rocky;
                                                                                                    15
Neutral

Financial Services
Banco Compartamos (COMPARTO.MX): First Take: Solid 3Q2010, in line with GSe, but above
                                                                                                    16
consensus
Americas: Banks: Piecing together the put-back risk                                                 17

Healthcare
Stryker Corp. (SYK): 3Q2010: MedSurg and gross margin upside offset Recon weakness                  18
Eli Lilly & Company (LLY): FDA's change of "heart" on Bydureon a negative for the industry          19
Johnson & Johnson (JNJ): Lowering estimates on earnings deceleration across the board               20
Boston Scientific Corp. (BSX): Modest top-line growth outlook tempers 3Q2010 EPS upside             21
Forest Laboratories, Inc. (FRX): Near-term EPS upside but focus still on pipeline and cash
                                                                                                    22
allocation

Industrials
Parker Hannifin Corp. (PH): FY1Q blowout - last blast for inventory restock?                        23
Waste Connections, Inc. (WCN): First Take: 3Q10 EPS beats consensus on stronger volume,
                                                                                                    24
margins
Illinois Tool Works (ITW): Lackluster 3Q vs. expectations; maintain Neutral                         25
Lockheed Martin Corp. (LMT): Numerous challenges highlighted in 3Q10; reiterate CL-Sell             26
Crown Holding, Inc. (CCK): Solid 3Q results; Buy on accelerating volume growth, strong FCF          27

Technology
Juniper Networks, Inc. (JNPR): Buy on the pullback: Street EPS going up on strong secular
                                                                                                    28
growth
Yahoo! Inc. (YHOO): First Take: Heavy buybacks, light 4Q2010 net revenue guide                      29
Solera Holdings, Inc. (SLH): Raising estimates on FX; positive takeaways from mgmt meetings         30
Altera Corp. (ALTR): Significant downside to 2011 Street estimates, prefer ALTR to XLNX             31

Telecom Services
NII Holdings (NIHD) Buy: Attractive entry point; upgrade to Buy, add to LatAm Focus List            32
Latin America: Telecom Services: Positioning for 3Q10: 3G driving mobile growth; fixed-
                                                                                              33
line/integrated struggling

Transportation
LLX Logistica (LLXL3.SA): Focus now on the Açu Port; keep Neutral rating on LLX               34

Utilities
American Electric Power (AEP): Ohio a concern but warming up on valuation and dividend hike   35

Reports Published
Americas Morning Summary                                                                                                          October 20, 2010




Focus Items

Americas: Retail: The new retail life cycle - focus on capital allocation                                                                       1

                                 Matthew J. Fassler (New York): matt.fassler@gs.com, (212) 902-6740
                                 Goldman Sachs & Co.
                                 Adrianne Shapira (New York): adrianne.shapira@gs.com, (212) 357-4174
                                 Goldman Sachs & Co.
                                 Michelle Tan, CFA (New York): michelle.tan@gs.com, (212) 902-3099
                                 Goldman Sachs & Co.
                                 Jonathan Baucom (New York): jonathan.baucom@gs.com, (212) 934-4213
                                 Goldman Sachs & Co.
                                 Ryan Brinkman (New York): ryan.brinkman@gs.com, (917) 343-9516
                                 Goldman Sachs & Co.
                                 John Marshall (New York): john.marshall@gs.com, (212) 902-6848
                                 Goldman Sachs & Co.

                                 Maturing sector demands a new retail life cycle template
                                 The retail life cycle has changed. Most retailers have exited the boom/bust unit growth cycle, and have
                                 reached a state of maturity that demands a heightened focus on allocating free cash flow. Moreover, stable
                                 competitive dynamics enable stronger cash flows, and empower retailers to direct cash back to shareholders.

                                 This matters now. Cash conversion ratios are near long-run peaks; the ratio of cash to enterprise value is at a
                                 peak for the sector; a lurking private equity bid is likely to keep retailers focused on deploying capital
                                 intelligently; and, the emergence of a “new normal,” slow growth macro backdrop should embolden firms to
                                 commit capital more aggressively.
                                 Key decisions revolve around capital allocation
                                 Retailers need to make hard decisions about directions for capital allocation; we do not think investors
                                 appreciate the potential scope and impact of these issues. We have developed a quantitative framework for
                                 matching growth prospects with uses of capital.
                                 Buy these stocks on smart capital allocation
                                 * Buy-rated COST and LULU are allocating capital to expansion, commensurate with promising return and
                                 expansion profiles.
                                 * Buy-rated KSS, LOW, and SPLS are well-positioned to raise dividends in the next 6-12 months.
                                 Increasingly mature retailers should return more capital to shareholders. Only high-growth firms should favor
                                 buybacks with excess cash; we favor dividends – these firms have the capacity to raise payouts given their
                                 cash flows and staying power. Note that investors seeking to preempt dividend hikes can use options to
                                 extract yield, taking advantage of the risk reduction benefits of big cash cushions.
                                 On the radar –candidates to re-enter the growth stage
                                 * Some firms are underinvesting relative to attractive returns and growth prospects; they have the opportunity
                                 to return to the early stage of the retail life cycle, unlocking latent growth opportunity with higher cap-ex
                                 potentially driving multiple expansion. These include Neutral-rated BBBY, COH, KMX, JCG, ROST, and
                                 WSM.
                                 * Conversely, some firms risk taking capital discipline too far, and undermining their franchises with a lack of
                                 investment. Notably, Neutral-rated GPC and HD should consider raising capex to solidify their standing.




Americas: Consumer Staples: Buy MJN, HANS, and LO with M&A picking up; upside to TUP on increased                                               2
cash returns

                                 Judy E. Hong (New York): judy.hong@gs.com, (212) 902-0490
                                 Goldman Sachs & Co.
                                 Andrew Sawyer, CFA (New York): andrew.sawyer@gs.com, (212) 902-5488
                                 Goldman Sachs & Co.
                                 Jason English (New York): jason.english@gs.com, (212) 902-3293
                                 Goldman Sachs & Co.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010



                                          Tyler Walling (New York): tyler.walling@gs.com, (212) 934-0495
                                          Goldman Sachs & Co.
                                          Stephanie Whited (New York): stephanie.whited@gs.com, (212) 855-9812
                                          Goldman Sachs & Co.

                                          We highlight 3 Buy names with exposure to the M&A theme; MJN, HANS and LO
                                          Deal activity has picked up in Consumer Staples. We highlight three of our Buy-rated stocks to investors
                                          seeking to participate in this theme:
                                          MJN (CL-Buy) has exposure to high-growth emerging Asian markets in a profitable category, which could
                                          appeal to a deep pool of large-cap Staples and Pharma companies. We rate the shares Conviction Buy.
                                          HANS (Buy) is a secular market share winner in the profitable and growing energy drink category. The larger
                                          beverage companies have below-average exposure to this attractive niche category.
                                          LO (CL-Buy) is another consistent market share growth company with a very attractive cash generation
                                          profile. We believe a potential buyer could generate meaningful cost synergies and could also optimize the
                                          capital structure.
                                          In this report we review our M&A rankings across our coverage.




                                          Increased cash back to shareholders a potential plus for TUP, SJM
                                          In addition to M&A, low interest rates have also created opportunities for better balance sheet deployment
                                          and increased cash returned to shareholders. Our top-down sector analysis shows the potential for 5%-10%
                                          average EPS accretion on an annualized basis if the industry were to move to a 3X gross debt/EBITDA from
                                          1.4X today. We highlight two stocks where we see potential positive changes in uses of cash:
                                          TUP (Buy) is poised to reach a nearly debt-free position during 2011. TUP is unlikely to be acquisitive so we
                                          expect a substantial increase in cash returned to shareholders. We forecast an increase in the dividend from
                                          $1 per share to $2.50-$3.00 by 2012, or a 5%-6% yield.
                                          SJM (Neutral) will be free to repurchase shares beginning in late 2010 after being restricted for the past two
                                          years due to the Folgers transaction. We model the company to buy $200 mn in stock in the current fiscal
                                          year, with potential for $300 mn in annual buyback activity in subsequent years.




UnitedHealth Group (UNH): The next six weeks will drive the 2011-2013 earnings view                                                                     3

UNH, $35.30                               Matthew Borsch, CFA (New York): matthew.borsch@gs.com, (212) 902-6784
Market cap                 $39,144 mn
                                          Goldman Sachs & Co.
                                          Sebastian Paquette, CFA (New York): sebastian.paquette@gs.com, (212) 902-5306
Target price                     $42.00
                                          Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E    Sam Wass (New York): sam.wass@gs.com, (212) 357-0617
EPS ($)                   4.00     3.75   Goldman Sachs & Co.
P/E                       8.8X    9.4X

EPS Quarter/Interim*      0.84     0.81
                                          What's changed
                                          Following a strong 3Q for UNH, we raise our 2010E EPS by $0.35 to $4.00, which is $0.05 above the high
Investment Lists                          end of the company’s revised range of $3.85-$3.95. Even with that revision our new 4Q EPS of $0.84 (vs.
                   Americas Buy List      prior $0.77) is likely to be conservative, as it would represent a 26% sequential decline from 3Q.
Coverage view                Attractive   With next year’s outlook still in flux pending final reform regulations, we maintain our 2011E EPS at $3.75, -
                                          6% yoy, and 2012E at $4.10, +10% yoy.
*Current and a year ago
                                          Implications
                                          The next six weeks will bring visibility on earnings potential for 2011-2013 as HHS regulators finalize the MLR
                                          rules and UNH provides first-time 2011 guidance at its Nov. 30 investor day. Initial 2011 guidance should be
                                          within a $3.25-$3.75 range, with the final HHS regulations on key details (taxes, state phase-ins, credibility)
                                          driving towards either the low or high end of that range. Either way, we expect a conservative bias on the
                                          initial guidance. Beyond that, we expect UNH will give investors a credible road map to 2012-2013 EPS
                                          growth of at least 10%. If those catalysts are combined with strong GOP gains in the Nov. 2 elections, we
                                          believe UNH stock will rally into year-end. As we move into 2011, UNH and other managed care stocks
                                          should trade on execution in the MLR-regulated environment, as well as investors’ assessment of the political




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010



                                           and regulatory environment (the dynamics of the post-2010 election Administration and Congress, as well as
                                           early assessment of the 2012 Presidential election).
                                           Valuation
                                           We maintain our 6-month price target of $42, implying 18% near-term stock upside. Our target is based on
                                           11x our 2011 EPS from our SOP.
                                           Key risks
                                           Key risks include the details of the near-term health reform regulations.



Intuitive Surgical, Inc. (ISRG): Slowing system sales/procedure volumes drive 3Q revenue shortfall                                                         4

ISRG, $279.04                              David H. Roman (New York): david.roman@gs.com, (212) 902-7839
Market cap                 $11,301 mn
                                           Goldman Sachs & Co.
                                           Nikhil Hanmantgad (New York): nikhil.hanmantgad@gs.com, (212) 357-4031
Target price                     $240.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E      2011E    Topher Orr (New York): topher.orr@gs.com, (212) 902-1017
EPS ($)                   8.72      9.89   Goldman Sachs & Co.
                                           Kunal Singh, CFA (Bangalore): kunal.singh@gs.com, (212) 934-6546
P/E                    32.0X      28.2X
                                           Goldman Sachs & Co.
EPS Quarter/Interim*      2.10      1.64

Investment Lists
                                           What's changed
                   Americas Sell List      Following Intuitive Surgical’s 3Q2010, we are lowering EPS forecasts for 2010/2011/2012 on the basis of
Coverage view                    Neutral   slower procedure growth and high levels of penetration in US high volume hospitals to $8.72/$9.89/$11.53
                                           from $8.76/$10.02/$11.84. Our 2010E EPS estimate is reduced (despite upside generated in Q3) due to an
*Current and a year ago
                                           expected slowing in procedure volumes in 4Q. Excluding a sharp deceleration in R&D spending, the
                                           company would have generated 190 bp of operating leverage in 3Q2010, by our estimates (the lowest level
                                           since 1Q2009). For 2010, we project procedure volume growth of 31% (around 270K procedures) vs.
                                           management guidance of 35% and down from our previous forecasts of 34%.
                                           Implications
                                           We maintain our Sell rating, as we suspect that our numbers will remain below consensus, given a more
                                           conservative outlook for system placements, procedure volume growth, and the potential for operating
                                           leverage. As penetration levels in large US hospitals (more than 300 beds) reaches peak levels (currently
                                           estimated at around 70%) as well as adoption in key therapeutic categories, we expect revenue growth to
                                           continue to slow, driving downside to sales and earnings forecasts. We do not foresee a sharp adoption
                                           curve in lower volume centers or in non-US regions, given cost pressures and lack of clinical data to support
                                           capital investment. At 28.2X our 2011 EPS estimate (vs. projected EPS growth of 13%), we do not believe
                                           the potential for decelerating growth is priced into the stock. As numbers are revised downward, we expect
                                           P/E multiple compression.
                                           Valuation
                                           We lower our 12-month, P/E- and DCF-based price target to $240 from $2.70 prior on our lower sales and
                                           EPS projections.
                                           Key risks
                                           Greater da Vinci surgical system adoption in smaller hospitals, international expansion, and faster than
                                           expected new product uptake.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                     October 20, 2010




Yahoo! Inc. (YHOO): Stuck in land of single-digit revenue growth for a few more quarters                                                                   5

YHOO, $15.49                                James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
Market cap                  $20,805 mn
                                            Goldman Sachs & Co.
                                            Ingrid Chung (New York): ingrid.chung@gs.com, (212) 902-2360
Target price                      $17.50
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Jordan Monahan (New York): jordan.monahan@gs.com, (212) 902-1879
EPS ($)                    0.89     1.09    Goldman Sachs & Co.
                                            Fred Krom (New York): fred.krom@gs.com, (212) 902-8618
P/E                       17.3X    14.2X
                                            Goldman Sachs & Co.
                      *
EPS Quarter/Interim        0.27     0.24

Investment Lists
                                            What's changed
                                  Neutral   Yahoo! reported 3Q GAAP revenue up 2% yoy, 0.5% below our estimate and just below the mid-point of
Coverage view                 Attractive    guidance. Recurring operating income increased 80% yoy, and was 4% below our estimate on higher costs
                                            of revenue. Metrics remained erratic, with page views down 4% yoy and search queries flat yoy in 3Q after
*Current and a year ago
                                            being up 7% yoy in 2Q, attributed to better results first-time. The company guided for weak 4Q revenue ex-
                                            TAC at the mid-point, 1% below our estimate and 4% below consensus, and for 4Q operating income of
                                            $200-280 mn, vs. GS and consensus at c.$265 mn.
                                            Implications
                                            (1) On the negative side, Yahoo! guided for decelerating display ad growth, from 17% yoy in 3Q to 9%-13%
                                            yoy in 4Q, below our prior forecast of 14% yoy. While 4Q2009 is a tough comparison due to year-end budget-
                                            flushing, 1Q2010 was down less sequentially than 1Q2007, 1Q2008, or 1Q2009, suggesting comparisons
                                            will remain tough, and Yahoo! may lag its medium-term target of 13%-16% display revenue growth for some
                                            time.
                                            (2) On the positive side, Yahoo! sees the Microsoft partnership providing upside to its original target of a mid-
                                            single-digit RPS increase, but noted that realizing upside may take until 2Q2011 as Microsoft’s algorithms
                                            drive higher prices per paid click but (due to better relevancy) fewer paid clicks.
                                            (3) Hurt by lower revenue and helped by buybacks reducing the share count, we reduce 2010-2012 EPS
                                            estimates by 1%-3% to $0.89/$1.09/$1.26.
                                            Valuation
                                            Our 6-month target price is unchanged at $17.50 (based on DCF and SOP). We incorporate around $9 per
                                            share in cash and Asian assets (taxed at 40%).
                                            Key risks
                                            Downside: search market share loss and de-rating at Asian affiliates; Upside: better-than-expected
                                            search/display monetization.


Other Headlines
Options Research

Weekly Options Watch: Earnings Focus: TXN, MGM, IGT, A, AMGN, CI, MSFT, MYL, KSS                                                                           6

                                            John Marshall (New York): john.marshall@gs.com, (212) 902-6848
                                            Goldman Sachs & Co.
                                            Maria Grant, CFA (New York): maria.grant@gs.com, (212) 855-0070
                                            Goldman Sachs & Co.

                                            Insight: Buy Financials options to gain exposure, but limit risk
                                            Financials equities have sharply underperformed the S&P 500 even as XLF options prices have relaxed. In
                                            our view, investors should take advantage of inexpensive options to gain upside exposure with limited risk
                                            ahead of mortgage headlines, the election, Fed meeting and the lifting of the foreclosure moratorium.
                                            Trades: TXN, MGM, IGT, A, AMGN, CI, MSFT, MYL, KSS
                                            Trade #1: Buy TXN calls ahead of 25-Oct earnings
                                            Expectations of market share gain and balanced supply chain are key positives for stock. Options are
                                            inexpensive despite high short interest.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010



                                           Trade #2: Sell MGM covered strangles to capture yield
                                           Options prices are high despite preannounced earnings and the recent capital raise. Investors should
                                           monetize elevated implied volatility by selling wide January strangles to collect a 14% premium.
                                           Trade #3: Buy IGT puts to hedge ahead of earnings
                                           Our analyst expects IGT 2011 guidance to disappoint investors given elevated consensus expectations.
                                           Shares could be volatile on earnings and G2E in early November. Buy puts to hedge.
                                           Trade #4: Sell Agilent (A) covered calls to generate yield
                                           Strong results and guidance seem to be priced in the stock. Limited upside and elevated implied vol make
                                           covered calls attractive.
                                           Trade #5: Buy AMGN Jan $55/$57.5 strangles for several catalysts
                                           Trade #6: Buy Cigna (CI) calls ahead of key catalysts
                                           Trade #7:Sell MSFT Jan-11 covered calls to increase yield
                                           Trade #8:Buy MYL calls to gain upside ahead of 3Q earnings
                                           Trade #9: Buy KSS calls ahead of capital allocation news, sales




Basic Materials

Steel Dynamics Inc. (STLD): Best value among steel producers; appealing valuations - Buy                                                                7

STLD, $14.05                               Sal Tharani (New York): sal.tharani@gs.com, (212) 357-0695
Market cap                  $2,559 mn
                                           Goldman Sachs & Co.
                                           Sandeep SM (Bangalore): sandeep.sm@gs.com, (212) 934-8155
Target price                     $17.00
                                           Goldman Sachs India SPL
Fiscal y/e Dec         2010E     2011E     Athena Maikish, Ph.D (New York): athena.maikish@gs.com, (212) 357-8894
EPS ($)                   0.65     2.00    Goldman Sachs & Co.
P/E                    21.5X       7.0X

EPS Quarter/Interim*      0.07     0.12
                                           What's changed
                                           We are tweaking our EPS estimates upward and reiterate our Buy rating on STLD. We raise our 4Q10 EPS
Investment Lists                           to $0.07 from $0.04 on expectations of lower scrap prices, which should enable higher margins in STLD’s
                   Americas Buy List       steel segment, offset partially by lower margins at its scrap division. Thus our 2010E EPS rises to $0.65 from
Coverage view                    Neutral   $0.62. We maintain 2011E/2012E/Normalized EPS at $2.00/$2.75/$2.50. There is no change to our 6-month
                                           $17 price target (based on P/E, EV/EBITDA and M&A valuation).
*Current and a year ago
                                           Implications
                                           Although STLD expects 4Q10 earnings to be modestly better and believes that it could improve margins
                                           further, we are less optimistic considering the state of steel fundamentals. We estimate STLD’s pre-tax
                                           income will decline sequentially by a third to $21 mn. But we expect Steel Dynamics to be the most profitable
                                           company in our steel producers’ coverage as measured on a profit per ton metric.
                                           We remain buyers of STLD, as we like its vertical integration into scrap and metallics, its entrance into rail
                                           products and its low cost structure, along with its attractive relative valuations. The company has produced
                                           consistently better operating margins than competitors, before and during the downturn. Even in a flattish
                                           demand environment, operating earnings could improve by at least $70 million when the company starts to
                                           break even at its Mesabi and rail divisions during 2011. We are not assuming any positive contribution from
                                           either of these projects currently, which could yield further upside.
                                           Valuation
                                           STLD currently trades at 7.0X 2011 P/E and 4.9X 2011 EV/EBITDA, compared to its carbon peers’ average
                                           of 9.7X and 5.5X, respectively.
                                           Key risks
                                           Downside risks: liquidity issues, nonresidential construction slowdown, overproduction/excess exports out of
                                           China, or a stronger US dollar.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   October 20, 2010



Consumer Cyclicals

Harley-Davidson, Inc. (HOG): A well executed quarter; but still see risk/reward as unfavorable                                                           8

HOG, $30.30                                Patrick Archambault, CFA (New York): patrick.archambault@gs.com, (212) 902-2817
Market cap                   $7,075 mn
                                           Goldman Sachs & Co.
                                           Aditya Oberoi (New York): aditya.oberoi@gs.com, (212) 357-7617
Target price                      $26.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    1.29     2.22   What's changed
P/E                       23.5X   13.7X    We raise our 2010E/2011E/2012E EPS estimates to $1.29/$2.22/$2.94 from $1.10/$2.16/$2.91, but retain
                      *                    our Sell rating on HOG. Our estimate changes reflect: (1) the impact of the 3Q beat, (2) a re-cadencing of
EPS Quarter/Interim        0.00   (0.63)
                                           restructuring costs, (3) a slightly higher production run rate than we had previously modeled, and (4) a higher
Investment Lists                           level of HDFS profitability. Our 2010 estimate factors in a compression in 4Q gross margin to 25.7% from
                      Americas Sell List   34.9% reflecting lower shipments, a weaker bike mix, and some incremental raw materials costs. Our six-
Coverage view                 Attractive
                                           month price target remains unchanged at $26.
                                           Implications
*Current and a year ago
                                           3Q results underscore that restructuring efforts are paying dividends, an area where we still see some upside
                                           risk driven by the possibility of additional efficiencies from previously announced actions at York and
                                           Wisconsin operations and potential future actions at Kansas City.
                                           From our perspective this is more than offset, however, by the downside risk from motorcycle demand. While
                                           we model in 140k units in 2011- a 47% peak to trough decline (consistent with the 1979-1983 downturn)
                                           there is significant uncertainty in this forecast. Using an average 30-year lifecycle, a 1% population growth
                                           rate, and a base of around 2mn Harleys on the road in the US implies replacement demand of roughly 90k,
                                           suggesting downside from our 140k if bike penetration does not increase.
                                           With shares trading at 13x our normalized EPS of $2.38, we believe there is not enough of a discount
                                           factored in to compensate investors for the end-market demand risk they are taking on and as such we
                                           remain Sell rated.
                                           Valuation
                                           We value HOG shares by applying an 11x multiple on our normalized EPS estimate of $2.38.
                                           Key risks
                                           Upside risks include better cost performance and a firming of US sales.



Americas: Entertainment: TV Ratings Monitor: FOX comes close but fails to break CBS's streak                                                             9

                                           Drew Borst (New York): drew.borst@gs.com, (212) 902-7906
                                           Goldman Sachs & Co.
                                           James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
                                           Goldman Sachs & Co.
                                           Brian Karimzad (New York): brian.karimzad@gs.com, (212) 357-1745
                                           Goldman Sachs & Co.
                                           Grace Huan (New York): grace.huan@gs.com, (212) 357-8280
                                           Goldman Sachs & Co.

                                           Despite boost from NFL and NLCS, FOX still the runner up
                                           CBS continued its winning streak in Week 4, despite competition from football and baseball. CBS finished the
                                           week with a 2.7 rating, down 7% yoy. Two and a Half Men and The Big Bang Theory were the top-rated
                                           shows on CBS last week. Despite the benefit of an NFL overrun on Sunday and two NCLS playoff games last
                                           week, FOX was unable to push CBS out of the top spot. Games 1 and 2 of the NLCS (Giants vs. Phillies)
                                           were down 22% and 10% yoy, respectively, compared to FOX’s coverage of last year’s ALCS (Yankees vs.
                                           Angels). In addition to differences in the national appeal of the teams, the decline is likely driven by the
                                           ongoing dispute between FOX and Cablevision, which has resulted in FOX pulling its broadcast signal from
                                           nearly 3 mn Cablevision customers in Philadelphia and New York. As a result, nearly 40% of TV households
                                           in New York and 1% of TV households in Philadelphia were unable to watch the NLCS.
                                           Broadcast networks off to slow start this season
                                           Four weeks into the fall season, the major broadcast networks are collectively down 7% yoy. FOX has the




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 20, 2010



                                           worst yoy performance, with a 12% decline in ratings driven by weakness in baseball and returning series.
                                           With the exception of Glee, the majority of returning shows on FOX are showing significant declines. House is
                                           -35%, while Simpsons and Family Guy are off 12% to 15% yoy. Despite strong competition on Thursday
                                           nights, Bones and Fringe have held up comparatively well, with moderate declines of 7% and 9%,
                                           respectively.
                                           ABC has the second-worst performance, with season-to-date ratings 9% lower yoy. Many of the same shows
                                           that suffered ratings declines last year are still seeing deteriorating trends this year. Thursday night anchors
                                           Grey’s Anatomy and Private Practice are down 20% and 25% this season against increasing competition
                                           from NBC and CBS. Key Sunday night shows Desperate Housewives and Brothers & Sisters are off 13% and
                                           10%. Better ratings from Modern Family (+26%), Dancing With the Stars (+22%, +32%), and Castle (+17%)
                                           are the few bright spots in ABC’s prime-time schedule. New shows such as Detroit 1-8-7 and Better With You
                                           have been underwhelming.
                                           Broadcast: Season-to-Date Ratings by Network Ex-Sports
                                           Live-plus-same-day basis through Week 4 (10/17/10): ABC: -5% yoy Total HH / -10% A18-49; CBS: 0% / -
                                           3%; FOX: -12% / -14%; NBC -3% / -5%.



Bed Bath & Beyond, Inc. (BBBY): Updating BBBY estimates and price target                                                                                10

BBBY, $43.41                               Matthew J. Fassler (New York): matt.fassler@gs.com, (212) 902-6740
Market cap                 $11,248 mn
                                           Goldman Sachs & Co.
                                           Mark-Andre Saucier-Nadeau (New York): mark-andre.saucier-nadeau@gs.com, (212) 902-3668
Target price                     $50.00
                                           Goldman Sachs & Co.
Fiscal y/e Feb         2011E     2012E     Ryan Brinkman (New York): ryan.brinkman@gs.com, (917) 343-9516
EPS ($)                   2.86     3.24    Goldman Sachs & Co.
                                           Jonathan Baucom (New York): jonathan.baucom@gs.com, (212) 934-4213
P/E                    15.2X      13.4X
                                           Goldman Sachs & Co.
EPS Quarter/Interim*      0.68     0.58

Investment Lists
                                           What's changed
                                 Neutral   We are inching our estimates higher to reflect modest adjustments to footage growth assumptions. Same-
Coverage view                    Neutral   store sales, gross margin, and expense rate forecasts are unchanged.
*Current and a year ago                    Implications
                                           Our 2010 estimate remains unchanged, but our 2011E and 2012E EPS go to $3.24 and $3.65, respectively,
                                           from $3.22 and $3.62 previously.
                                           We remain Neutral on BBBY shares as EBIT growth story is likely to moderate, as compares normalize with
                                           the cycling of macro weakness and Linen’s closings, and given some building pressure from higher
                                           commodity costs. Note that our sequential sales and profit analysis suggests smaller beats in the quarters
                                           ahead relative to recent showings.
                                           We do acknowledge the improving capital allocation story, which will likely get better as the firm has
                                           ratcheted up buybacks, emboldened by a stabilizing backdrop, and continues to accumulate a massive cash
                                           balance.
                                           Valuation
                                           We raise our 12-month target to $50 from $49 to reflect our revised forecast and the impact of a higher
                                           market multiple on the variable component of our valuation framework. Our price target is derived from a
                                           blend of risk/reward analysis and DCF.
                                           Key risks
                                           Downside: cycling LIN’s demise and strong gross margin performance from last year. Upside: continued
                                           sales momentum.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                 October 20, 2010



Consumer Staples

Tupperware Brands Corp. (TUP): First Take: Stock likely to dip on moderate sales shortfall; still Buy                                                11

TUP, $48.62                                 Andrew Sawyer, CFA (New York): andrew.sawyer@gs.com, (212) 902-5488
Market cap                   $3,112 mn
                                            Goldman Sachs & Co.
                                            Stephanie Whited (New York): stephanie.whited@gs.com, (212) 855-9812
Target price                      $60.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    3.63     4.31    News
P/E                       13.4X    11.3X    Tupperware’s 3Q2010 EPS of $0.64 exceeded our $0.61 forecast and the $0.58 consensus. Upside versus
                      *                     the consensus came from better operating margins (+1-2c) and a better tax rate as potential adverse tax
EPS Quarter/Interim        0.61     0.55
                                            legislation did not pass as feared (+5c). Sales growth of 3% was 200-300 bp below our forecast but a more
Investment Lists                            modest 50 bp below consensus. The company lowered FY sales guidance to 6-7% from 6-8%, but raised its
                      Americas Buy List     full-year EPS outlook to $3.60-$3.65 from $3.51-$3.61.
Coverage view                     Neutral   Analysis
                                            We see a modestly negative read-across from the results:
*Current and a year ago
                                            * The main concern is that organic sales growth slowed to 3%, short of our 5-6% forecast. On the plus-side,
                                            the company is still looking for a pick-up to 4-6% growth in the 4Q, consistent with our 5% forecast.
                                            * Full-year guidance is moving up by $0.06-$0.07 at the midpoint. Favorable forex moves account for $0.11
                                            of the increase, with partial offset from moderately lower sales growth and higher unallocated expenses.
                                            Implications
                                            We expect the stock to trade down moderately on the sales shortfall. Even so, we remain Buyers of any
                                            weakness for three reasons:
                                            (1) TUP remains positioned to sharply increase its dividend (or buybacks) in 2011 as debt falls below its
                                            target, which is a catalyst for P/E expansion.
                                            (2) Consensus estimates still need to move higher from favorable forex.
                                            (3) We expect the sales softness to prove short-lived. Much of the 3Q miss came from a sharp -36% decline
                                            in CIS, with the company citing the fires/heat wave in Russia that should not recur. The balance of the
                                            emerging market portfolio continued to post strong growth.
                                            Our price target and estimates are unchanged. The company is hosting a conference call at 10am on
                                            Wednesday.



The Coca-Cola Company (KO): Solid fundamentals continue; buyback announcement next catalyst                                                          12

KO, $60.00                                  Judy E. Hong (New York): judy.hong@gs.com, (212) 902-0490
Market cap                 $139,620 mn
                                            Goldman Sachs & Co.
                                            Tyler Walling (New York): tyler.walling@gs.com, (212) 934-0495
Target price                      $68.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    3.50     3.90    What's changed
P/E                       17.1X    15.4X    KO reported 3Q10 EPS of $0.92, $0.03 ahead of the consensus estimates. The beat was driven mostly by
                                            better than expected volume growth of 5%. KO also upped its share buyback plan by $500 mn to $2.0 bn for
EPS Quarter/Interim*       0.73     0.66
                                            2010.
Investment Lists
                                            Implications
                      Americas Buy List     We believe that 3Q10 results support our positive thesis on the KO story as solid volume growth, positive
Coverage view                 Attractive    price/mix and cost savings are driving strong underlying profit growth. First, 3Q10 marks a second
                                            consecutive quarter of 5% unit growth and we forecast that KO can continue to sustain 4%-5% growth driven
*Current and a year ago
                                            by developing/emerging market growth where per capita growth is expanding and KO is gaining market
                                            share. We point to volume acceleration in key markets such as Russia (+30%) and China (+12%) along with
                                            high levels of sustained growth in Brazil (+13%) as key positives. In addition, we are encouraged by the
                                            progress KO is making in the US, as KO has stepped up marketing investments and is driving incremental
                                            transactions through new price/packaging. Second, we believe KO is set to grow underlying EPS in 2011 at a
                                            healthy 10%+ rate driven by sustained unit growth, cost saves, and more aggressive cash deployment
                                            toward share repurchases. We believe KO has ample opportunity to accelerate buybacks in 2011 given its
                                            current $4.50/share in cash ($10.5 bn) and $3 bn of estimated free cash flow after dividend next year.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010



                                          We trim our 2010 EPS to $3.50 from $3.53 to reflect the shift in timing of G&A expenses, higher marketing
                                          spending and lower interest income in 4Q10. We increase our 2011/ 2012 EPS to $3.90/$4.28 from $3.88/
                                          $4.27 to reflect a greater share buyback amount than we previously modeled.
                                          Valuation
                                          Our 12-month P/E derived price target of $68 remained unchanged.
                                          Key risks
                                          Stepped up competition, weaker global macros.



Energy

Occidental Petroleum Corp. (OXY): Buy on the dip; pullback appears unwarranted                                                                        13

OXY, $81.20                               Arjun N. Murti (New York): arjun.murti@gs.com, (212) 357-0931
Market cap                 $65,954 mn
                                          Goldman Sachs & Co.
                                          Joe Citarrella (New York): joe.citarrella@gs.com, (212) 902-6787
Target price                     $95.00
                                          Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E    Will Su (New York): will.su@gs.com, (212) 357-9301
EPS ($)                   5.93     9.40   Goldman Sachs & Co.
P/E                    13.7X      8.6X

EPS Quarter/Interim*      1.83     1.30
                                          What's changed
                                          Occidental Petroleum reported adjusted 3Q2010 EPS of $1.47 versus our estimate and the First Call
Investment Lists                          consensus of $1.35. The variance with us was primarily due to higher-than-expected Midstream and
                    Americas Buy List     Chemicals income partially offset by lower-than-expected E&P earnings. We make minor changes to our
          Americas Conviction Buy List    2010-2015 EPS estimates for Oxy; our new forecasts are $5.93/$9.40/$13.10/$11.60/$13.35/$15.35 versus
Coverage view                Attractive   $5.80/$9.25/$12.80/$12.00/ $13.61/$14.87 before.
*Current and a year ago                   Implications
                                          We reiterate our Conviction Buy on Oxy shares and would especially use the 5% post-earnings selloff as an
                                          opportunity to add to positions. In our view, Oxy has now addressed two key concerns otherwise weighing on
                                          the stock recently: (1) corporate governance and leadership succession and (2) avoiding a repeat Phibro
                                          trading unit loss in 3Q. Unfortunately, with California E&P production below expectations for a second straight
                                          quarter and the company announcing additional E&P acquisitions, management did not improve confidence
                                          in its E&P production outlook as we thought it would. In our view, the 2Q and 3Q California volume miss is a
                                          function of temporary “above ground” challenges rather than a sign of “below ground” problems; acquisitions
                                          have long been part of Oxy’s strategy and we struggle to understand the surprise. Among large-cap oil
                                          companies, we continue to believe Oxy is on-track to deliver top quartile long-term E&P production growth,
                                          returns on capital, and free cash flow.
                                          Valuation
                                          We see 19% upside to our unchanged, $95, six-month price target based on asset value and cash flow
                                          valuation analyses.
                                          Key risks
                                          Key risks to our view and price target are oil price volatility and E&P project disappointments.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       October 20, 2010




Peabody Energy Corp. (BTU): Remains our favorite coal stock on organic growth + JV upside; Buy                                                             14

BTU, $50.53                                 Brian Singer, CFA (New York): brian.singer@gs.com, (212) 902-8259
Market cap                  $13,552 mn
                                            Goldman Sachs & Co.
                                            Andre Benjamin (New York): andre.benjamin@gs.com, (212) 855-0470
Target price                      $60.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Pavan Hoskote (New York): pavan.hoskote@gs.com, (917) 343-9044
EPS ($)                    3.12     4.61    Goldman Sachs & Co.
P/E                       16.2X    11.0X

EPS Quarter/Interim
                      *
                           0.93     0.34
                                            What's changed
                                            Peabody reported adjusted 3Q10 EPS/EBITDA of $0.99/$567 mn vs our $0.94/$535 mn and FC $0.91/$526
Investment Lists                            mn. The beat vs our estimate was largely driven by higher PRB volumes, higher trading EBITDA (as activity
                      Americas Buy List     in Asia continues to grow) and better cost control in Australia. 2010-2011 volume guidance was largely
Coverage view                 Attractive    unchanged, though management indicated 2010 domestic volumes would be near the high end of a 185-195
                                            MM tons range, while Australian production would be near the lower end of a 27-29 MM tons range. In
*Current and a year ago
                                            Australia, management indicated most of the adverse weather impact to volumes is due to port/rail
                                            challenges and not issues at its mines. Management also appeared to share our concern PRB prices could
                                            soften from current levels ($14-$15/ton) without demand increases if there are additional production
                                            increases. 2010-2012 EPS is now $3.12/$4.61/$5.17 from $3.06/$4.63/$5.10 on minor cost/volume/realized
                                            price adjustments.
                                            Implications
                                            Buy-rated Peabody Energy remains our favorite coal stock due to: (1) exposure to growing domestic and
                                            international markets; (2) EPS upside from pending Asia JVs; and (3) attractive B/S flexibility. At a time when
                                            many coal companies are generating record cash flows but becoming increasingly dependent on M&A to
                                            sustain growth, Peabody is one of the few companies with attractive organic reinvestment opportunities in
                                            multiple regions. Valuation remains attractive relative to historical levels and peers given its attractive growth
                                            profile and above average returns.
                                            Valuation
                                            We see 16% upside to our $60 6-month multiples based target price. BTU trades at 5.8x 2-yr roll fwd
                                            EV/EBITDA vs a 6.8x historical average, 5.3x for CNX, 4.9x for ACI and 4.0x for ANR.
                                            Key risks
                                            Weak China demand datapoints, less attractive than expected JV terms, weaker volumes from adverse
                                            weather and gov’t pronouncements.



Weatherford International Ltd. (WFT): WFT's 3Q reminds us the road to recovery can be rocky; Neutral                                                       15

WFT, $17.18                                 Daniel Boyd, CFA (New York): daniel.boyd@gs.com, (212) 357-1804
Market cap                  $12,905 mn
                                            Goldman Sachs & Co.
                                            Dimitry Dayen, CFA (New York): dimitry.dayen@gs.com, (212) 855-0497
Target price                      $19.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Kyle Jenke (New York): kyle.jenke@gs.com, (917) 343-3196
EPS ($)                    0.59     1.20    Goldman Sachs & Co.
P/E                       29.3X    14.4X

EPS Quarter/Interim
                      *
                           0.24     0.02
                                            What's changed
                                            WFT reported adjusted 3Q10 EPS of $0.18 vs. GS of $0.19 and consensus of $0.17. International operating
Investment Lists                            income missed our expectations by 19% while North America EBIT beat our forecast by 14%. We adjusted
                                  Neutral   our 2010-2012 EPS estimates by -4%/+2%/-4% to $0.59/$1.20/$1.62.
Coverage view                     Neutral   Implications
*Current and a year ago
                                            WFT posted relatively in-line, but messy, results with EBIT just 5% below our estimate and seemingly
                                            optimistic EPS guidance of $1.30 for 2011. While typically thought of as a levered vehicle to invest in
                                            international growth, the WFT story is now much more about North America (54% of EBIT in 3Q and 49% in
                                            2011E). This is not necessarily a negative in our view given the newfound sustainability of liquids activity;
                                            however, the disappointment in 3Q suggests that international execution issues are likely to linger.
                                            The industry is likely to experience a number of project start-ups and mobilizations over the next few
                                            quarters, WFT included, which will set the stage for growth in 2011 and 2012. However, given WFT’s smaller




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                       October 20, 2010



                                           scale and thin margins, any disruptions will likely impact WFT more than peers.
                                           All in all, we believe that WFT will have its day in the sun, but 3Q results remind us that the path to recovery
                                           is likely to be rocky until there is a strong recovery in the broader international market. This increasingly looks
                                           like a mid-2011 event, and while that is not that far away, we prefer to recommend companies with better
                                           execution profiles (HAL/SLB), especially given that WFT is trading at a premium to HAL on most metrics.
                                           Valuation
                                           WFT is trading at 4%/6% premium to peers on 2011E P-E/EV-EBITDA. Our 6-month, EBITDA-based price
                                           target of $19 is unchanged.
                                           Key risks
                                           Downside: weaker commodities, poor execution; upside: strong execution.



Financial Services

Banco Compartamos (COMPARTO.MX): First Take: Solid 3Q2010, in line with GSe, but above consensus                                                           16

COMPARTO.MX, P$89.91                       Jason B. Mollin (Sao Paulo): jason.mollin@gs.com, +55(11)3371-0871
Market cap                P$37,366 mn
                                           Goldman Sachs Brasil Bco Múlt S.A.
                                           Carlos G. Macedo (Sao Paulo): carlos.macedo@gs.com, +55(11)3371-0887
Target price                     P$96.10
                                           Goldman Sachs Brasil Bco Múlt S.A.
Fiscal y/e Dec         2010E      2011E    Wesley Okada (Sao Paulo): wesley.okada@gs.com, +55(11)3371-0875
EPS (P$)                  4.48      5.60   Goldman Sachs Brasil Bco Múlt S.A.
P/E                    20.0X       16.0X

EPS Quarter/Interim*      1.16      0.86
                                           News
                                           Compartamos’s 3Q2010 net income of P$491 million (EPS P$1.18) was 1.9% above GSe, but 7.3% above
Investment Lists                           Bloomberg consensus. The company reported an ROE of 40.9% which was slightly above our estimate of
                                 Neutral   40.2%. Management will host a conference call on Wednesday, October 20th, at 10am Eastern Time (1 888
Coverage view                Attractive    335-5539; password: 99686662)
*Current and a year ago
                                           Analysis
                                           Solid loan portfolio growth. Compartamos delivered robust total loan growth of 24.2% yoy, on the back of
                                           group lending (Credito Mujer) which increased 23% yoy and home improvement loans (Credito Mejora Tu
                                           Casa) which grew 33% yoy.
                                           NIM remains resilient. Compartamos is a liability-sensitive bank. As such, the company benefits from the
                                           current low interest rate environment. Additionally, Compartamos was able to maintain lending rates of
                                           roughly 70% per year, which contributed to the 61.4% net interest margin in the 3Q10 (an increase from
                                           59.7% in 2Q10).
                                           Asset quality improved in the quarter. The NPL ratio declined to 1.97% in 3Q10 from 2.19% in 2Q10, driven
                                           by a significant improvement in the group lending product, which reported a 19 bp decrease qoq to 0.77%.
                                           Better efficiency ratio. As part of Compartamos’ labor intensive business model, the company added 1,863
                                           employees over the past year (+25.6% yoy) to support its 23.1% growth in total clients. However, the bank
                                           was able to deliver a 133 bp yoy decrease in its efficiency ratio, mainly derived from the recently
                                           implemented cost-control policies.
                                           Implications
                                           Compartamos reported a solid 3Q10, with EPS 1.9% above GSe. The bank was able to deliver a
                                           combination of strong loan growth, better asset quality and improving cost efficiencies. However, we maintain
                                           our Neutral rating based on valuation as COMPARTO.MX trades at a 2011E P/E of 16.0X and 2011E P/BV
                                           of 5.5X. Our price target is unchanged.



Americas: Banks: Piecing together the put-back risk                                                                                                        17

                                           Richard Ramsden (New York): richard.ramsden@gs.com, (212) 357-9981
                                           Goldman Sachs & Co.
                                           Ryan M. Nash, CFA, CPA (New York): ryan.nash@gs.com, (212) 902-8963
                                           Goldman Sachs & Co.
                                           Soumil Zaveri (New York): soumil.zaveri@gs.com, (212) 902-8484
                                           Goldman Sachs & Co.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                      October 20, 2010




                                            Focus on put-backs overshadows core EPS
                                            Despite reporting 3Q10 EPS ahead of expectations (core EPS of $0.30 ex. reserve release), BAC’s stock
                                            underperformed on fears of elevated private label put-backs, particularly that several large investors were
                                            trying to force BAC to repurchase $47 bn of PLS. We recognize that there are still a large number of
                                            unknowns in assessing the ultimate liability from put-backs. That said, our base-case analysis implies that
                                            losses from mortgage put-backs is around $11 bn versus a total market cap loss of $17 bn since the issue
                                            has come to focus. Importantly, we believe that put-back costs will be spread over a number of years, making
                                            this issue more of an earnings versus a capital issue.
                                            Updating aggregate loss estimates
                                            We estimate that total losses could reach around $25 bn (with $6 bn from GSEs, $3.5 bn from monoclines,
                                            and $15 bn from private label investors). However this is partially offset by $7.1 bn of losses which has either
                                            been provisioned for or charged off to date. Tax affecting the loss reduces the amount to about $11 bn.
                                            Private label: mix matters
                                            The most important assumption is total private label losses (including monoline wraps), which we peg at just
                                            under $20 bn. While investors are focusing on the $450 bn of exposure to whole loan/PLS, almost half of the
                                            exposure is in prime jumbo loans, which should experience lower loss severity and hence lower potential put-
                                            back risk. While remaining exposure remains susceptible to repurchase requests, we believe losses will
                                            remain manageable.
                                            Bottom line: we continue to like BAC
                                            BAC’s shares are now trading at less than 7X our 2011 EPS estimate of $1.75. And, after reporting core EPS
                                            (ex. reserve releases) of $0.30 in 3Q, the stock is trading at less than 10X its current earnings run-rate. While
                                            the put-back issue is expected to remain a headwind in the near term, we believe the recent move represents
                                            implied losses well above our current estimates. While we recognize the uncertainty over the final impact, we
                                            believe that the market is discounting significant risk.




Healthcare

Stryker Corp. (SYK): 3Q2010: MedSurg and gross margin upside offset Recon weakness                                                                        18

SYK, $50.07                                 David H. Roman (New York): david.roman@gs.com, (212) 902-7839
Market cap                  $20,048 mn
                                            Goldman Sachs & Co.
                                            Nikhil Hanmantgad (New York): nikhil.hanmantgad@gs.com, (212) 357-4031
Target price                      $54.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Topher Orr (New York): topher.orr@gs.com, (212) 902-1017
EPS ($)                    3.31     3.66    Goldman Sachs & Co.
                                            Kunal Singh, CFA (Bangalore): kunal.singh@gs.com, (212) 934-6546
P/E                       15.1X    13.7X
                                            Goldman Sachs & Co.
                      *
EPS Quarter/Interim        0.80     0.69

Investment Lists
                                            What's changed
                                  Neutral   Stryker’s 3Q2010 results mirrored numbers reported by J&J within reconstructive implants (58% of sales);
Coverage view                     Neutral   however, this was more than offset by strength in SYK’s MedSurg business (42% of sales). Still, excluding
                                            Ascent, the business grew 10% against an 8% decline comp. On the Recon side of the business, SYK was
*Current and a year ago
                                            able to offset some of the end-user market weakness with share gains (hips, 17% of sales), but overall
                                            growth still slowed 10 bp to 1.3% constant currency. The gross margin outpaced our estimate by 70bp due to
                                            manufacturing efficiencies and the roll-off of certain investment spending, in our view. We raise our
                                            2010/2011/2012 EPS forecasts from $3.29/$3.62/$3.91 to $3.31/$3.66/$3.95, as a result of increased top-
                                            line growth and gross margins.
                                            Implications
                                            3Q2010 was the second consecutive quarter characterized by weak Recon sales and strong MedSurg
                                            results. It is evident that Stryker’s diversification has been an advantage, but we question whether normalized
                                            growth in MedSurg will exceed 5%-6%. This drives long-term revenue growth at the 5% level excluding
                                            acquisitions and currency. As such, we project a 2010E-2013E EPS CAGR of 9.2%, which assumes limited
                                            use of cash allocated to share repurchases. At 13.7X 2011E EPS (12.8X, excluding net cash) against a
                                            three-year EPS CAGR below 10%, we see the stock as fairly valued and maintain our Neutral rating. With
                                            shares of SYK up 16% since September 1 vs. the S&P Healthcare Equipment Index up 12%, we think the




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010



                                           market is pricing in long-term growth that we believe will prove too high.
                                           Valuation
                                           We raise our 12-month price target (based on DCF and P/E) to $54 from $53 on the basis of higher EPS
                                           forecasts.
                                           Key risks
                                           Downside risks: pricing pressure in orthopaedic implants, slowing demand overseas, share loss. Upside
                                           risks: synergistic acquisition, increased return of cash to shareholders, recovery in key markets.



Eli Lilly & Company (LLY): FDA's change of "heart" on Bydureon a negative for the industry                                                            19

LLY, $37.45                                Jami Rubin (New York): jami.rubin@gs.com, (212) 357-7536
Market cap                 $41,158 mn
                                           Goldman Sachs & Co.
                                           Florence Tsang, CFA (New York): florence.tsang@gs.com, (212) 357-3567
Target price                     $32.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E

EPS ($)                   4.64     4.62    News
P/E                       8.1X     8.1X    Eli Lilly and its partners Amylin and Alkermes announced this evening that they received a complete
                                           response letter for Bydureon. The news comes as a significant surprise as the companies and Street widely
EPS Quarter/Interim*      1.14     1.20
                                           anticipated approval on the Oct 22 PDUFA. We had estimated $59 mn this year, rising to $1.0 bn by 2015
Investment Lists                           (LLY’s 50% economics). The FDA requested a thorough QT (tQT) study with exposures of exenatide
                   Americas Sell List      consistent with those of renally impaired patients. FDA also requested the results of DURATION-5 (study
Coverage view                    Neutral
                                           already completed), which is the mirror study of DURATION-1 using the commercial scale material. The
                                           companies aim to submit their reply by the end of 2011. However, this may be a conservative goal, as the
*Current and a year ago                    study design will need to be agreed with FDA, and the companies have not yet spoken with FDA post CRL.
                                           Analysis
                                           More importantly, the issue may not be specific to Bydureon or exenatide, but rather the companies’
                                           understanding is that this tQT study is required for all new diabetes drugs before FDA approval. (BMY’s dapa
                                           has been held up for the same reason). What is most surprising is that this study/QT concerns were not
                                           previously raised in the companies’ discussions with FDA, and only first revealed as an approvability issue in
                                           the Oct-2010 CRL. Previous discussions with FDA indicated that the QT assessment in the DURATION-1
                                           study was acceptable to satisfy the requirement, and was submitted in May-09. However, in a roundabout,
                                           FDA now requests a controlled tQT study, not a QT assessment as part of a pivotal study. No CV issues
                                           have been seen in any DURATION studies, or any preclinical or in-vitro studies. Moreover, its predecessor
                                           Byetta has been on the market for years and not shown any CV issues. Clearly, the risk to Bydureon is a
                                           finding of a QT issue which won’t be known until studies are completed. Our sales estimates are under
                                           review.
                                           Implications
                                           We view the news as a negative sign for the entire industry, as it is a strong signal of an ever more cautious
                                           and safety-focused FDA and evidence of an ever more difficult operating environment. PT is unchanged.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   October 20, 2010




Johnson & Johnson (JNJ): Lowering estimates on earnings deceleration across the board                                                                  20

JNJ, $63.29                                 Jami Rubin (New York): jami.rubin@gs.com, (212) 357-7536
Market cap                 $173,959 mn
                                            Goldman Sachs & Co.
                                            Florence Tsang, CFA (New York): florence.tsang@gs.com, (212) 357-3567
Target price                      $60.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    4.76     4.90    What's changed
P/E                       13.3X    12.9X    We lower our estimates on JNJ’s 3Q earnings, which showed a deceleration across most of its business
                      *                     segments. This represents the second sequential quarter of disappointing results. JNJ’s MD&D business unit
EPS Quarter/Interim        1.23     1.20
                                            showed weakness nearly across the board, even relative to the tempered expectations after 2Q2010
Investment Lists                            earnings. The consumer business also showed deceleration in several businesses outside the OTC business
                                  Neutral   (expected weakness), suggesting the pressures have spread beyond OTC, which continues to be under
Coverage view                     Neutral
                                            resolution. The Pharma business reported in-line results, although we note that Rx trends show new
                                            launches to still be weak, and its base pharma business continues to erode. We now project 2010 estimates
*Current and a year ago                     of $4.76 (prev. $4.71) due to the quarter’s beat on lower costs, one-time gains and a lower tax rate. We have
                                            lowered future estimates, and now forecast 2011 EPS of $4.90 (prev. $5.06), 2012 EPS of $5.20 (prev.
                                            $5.45) and 2013 EPS of $5.59 (prev. $5.80).
                                            Implications
                                            We view today’s results as evidence of a tougher operating environment, for which it will likely take time to
                                            ease (if at all). JNJ cited the weak economy leading to MD&D segment’s lower elective procedures and the
                                            recent discontinuation of COBRA benefits to the unemployed in US. However, managed care companies
                                            indicate that weakness is due to payors pushing back on procedures/devices, suggesting the decline may be
                                            more than cyclical (and not entirely temporary). While the OTC recall and continued remediation at the still
                                            closed Port Washington facility were expected pressures on JNJ’s OTC business, the 3Q decline was worse
                                            than 1Q and 2Q. Deceleration was also seen in several other consumer businesses such as skin care and
                                            women’s health due to increased competitive pressures and slower growth.
                                            Valuation
                                            We maintain our 12-month price target of $60, based on 12X our 2011 EPS.
                                            Key risks
                                            Protracted weakness in major businesses, better than expected pipeline. execution.



Boston Scientific Corp. (BSX): Modest top-line growth outlook tempers 3Q2010 EPS upside                                                                21

BSX, $5.97                                  David H. Roman (New York): david.roman@gs.com, (212) 902-7839
Market cap                   $9,074 mn
                                            Goldman Sachs & Co.
                                            Nikhil Hanmantgad (New York): nikhil.hanmantgad@gs.com, (212) 357-4031
Target price                       $5.50
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Topher Orr (New York): topher.orr@gs.com, (212) 902-1017
EPS ($)                    0.38     0.41    Goldman Sachs & Co.
                                            Kunal Singh, CFA (Bangalore): kunal.singh@gs.com, (212) 934-6546
P/E                       15.8X    14.7X
                                            Goldman Sachs & Co.
EPS Quarter/Interim*       0.12     0.12

Investment Lists
                                            What's changed
                      Americas Sell List    Following Boston Scientific’s 3Q2010 earnings release, we are lowering our sales forecasts for 2010-2013E
Coverage view                     Neutral   to reflect (1) lost market share in Pacemakers/Electrophysiology (10% of sales combined), (2) competitive
                                            and macro economic pressures in Endosurgery (20% of sales), and (3) share loss in Neurovascular (4% of
*Current and a year ago
                                            sales). That said, our 2010-2013E EPS estimates are increased as a result of more favorable product mix, a
                                            faster-than-expected recovery in the US implantable defibrillator business (ICDs, 20% of sales) following the
                                            March 2010 ship hold, and effective cost management. We raise our 2010/2011/2012/2013 adjusted EPS
                                            estimates (ex-amortization) to $0.63/$0.61/$0.69/$0.77 from $0.57/$0.59/$0.66/$0.75.
                                            Implications
                                            We maintain our Sell rating. Longer term, we continue to question the sustainability of growth in the
                                            company’s core end-user cardiovascular device markets (42% of sales), given increased pricing pressure.
                                            On a more positive note, we think Boston Scientific’s approach to target multiple therapeutic categories




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   October 20, 2010



                                           through a combined salesforce could prove effective. The company is more aggressively trying to structure
                                           its business to benefit from hospital vendor consolidation compared to the peer group. Nevertheless, we think
                                           Boston Scientific’s key challenge remains product flow and business mix (50% of revenues is in markets that
                                           we do not believe are growing more than 1%-3%). We await further details at the company’s November 19,
                                           2010, analyst meeting to reassess the potential for top-line acceleration associated with international
                                           expansion and the launch of pipeline products.
                                           Valuation
                                           We raise our 12-month price target (based on P/E, EV/EBITDA, and DCF) to $5.50 from $5.25 prior on
                                           higher EPS forecasts.
                                           Key risks
                                           Share gains in ICDs; greater cost savings; and faster new product uptake.



Forest Laboratories, Inc. (FRX): Near-term EPS upside but focus still on pipeline and cash allocation                                                  22

FRX, $33.02                                Randall Stanicky, CFA (New York): randall.stanicky@gs.com, (212) 357-3292
Market cap                  $9,959 mn
                                           Goldman Sachs & Co.
                                           Gregory Waterman, CFA (New York): gregory.waterman@gs.com, (212) 855-7725
Target price                     $33.00
                                           Goldman Sachs & Co.
Fiscal y/e Mar         2011E     2012E     Stephan Stewart (New York): stephan.stewart@gs.com, (212) 934-4218
EPS ($)                   3.95     4.30    Goldman Sachs & Co.
P/E                       8.4X     7.7X

EPS Quarter/Interim*      1.01     0.97
                                           What's changed
                                           Forest’s F2Q2011 report reinforced our view that near-term earnings will see support (our F2011 EPS
Investment Lists                           remains above updated guidance), but the core share price drivers remain execution on the pipeline and
                                 Neutral   cash allocation. We continue to believe that management is in a unique position to unlock material value
Coverage view                    Neutral   should we see a more aggressive use of cash, but without more clarity on potential action, we remain on the
                                           sidelines. In terms of the pipeline, the approval and launch of ceftaroline is the next key catalyst. We see
*Current and a year ago
                                           approval as highly likely, however, in our view use is more likely in second line against management’s view of
                                           first line use. There is no change to our Neutral rating.
                                           Implications
                                           Our EPS estimates rise for F2011, but our changes are mixed thereafter given higher sales and lower tax,
                                           offset by higher assumptions for SG&A spend after F2011. Our sales estimates move higher for mature
                                           products (Lexapro and Namenda) and lower for newer launches (Savella and Bystolic), reflecting results in
                                           the quarter and current prescription trends. Our SG&A assumptions move lower for F2011, but higher
                                           thereafter as we assume incremental spending to support new launches. For R&D, we assume lower
                                           spending in the quarter was tied to milestone timing and leave our longer-term spending assumptions
                                           essentially unchanged. Our new F2011-F2014 EPS estimates are $3.95, $4.30, $1.44, and $1.82,
                                           respectively (from $3.84, $4.32, $1.47 and $1.81).
                                           Valuation
                                           Our 12-month $33 price target is unchanged and is based on a combination of P/E and EV/EBITDA.
                                           Key risks
                                           Upside risks include more aggressive cash allocation, while downside risks include pipeline failure relative to
                                           our risk-adjusted forecasts.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 20, 2010



Industrials

Parker Hannifin Corp. (PH): FY1Q blowout - last blast for inventory restock?                                                                            23

PH, $75.08                                  Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
Market cap                  $12,321 mn
                                            Goldman Sachs & Co.
                                            Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
Target price                      $92.00
                                            Goldman Sachs & Co.
Fiscal y/e Jun            2011E   2012E     Eddie Szeto, CFA (New York): eddie.szeto@gs.com, (212) 357-3320
EPS ($)                    6.05     7.10    Goldman Sachs & Co.
                                            Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
P/E                       12.4X    10.6X
                                            Goldman Sachs India SPL
                      *
EPS Quarter/Interim        1.40     0.64

Investment Lists
                                            What's changed
                                  Neutral   PH reported FY1Q2011 EPS of $1.51, well above our/consensus estimates of $1.15/ $1.05 with revenues/op
Coverage view                 Attractive    profit +7%/ +23% vs. GS. Key variances: (1) non-recurring tax and FX benefits +$0.13, (2) stronger N.
                                            America (+$0.14)and International (+$0.22) Industrial performance, (3) weaker Aero margins (-$0.07), and
*Current and a year ago
                                            (4) stronger CIC +$0.02. FY2011 EPS guidance was raised to $5.20-$5.80 from $3.60-$4.40 vs.
                                            GS/consensus of $4.95/ $4.53. We raise our FY2010-12 EPS estimates to $6.05/ $7.10/ $8.30 from $4.95/
                                            $6.00/ $7.00 and maintain our Neutral rating.
                                            Implications
                                            We attribute stronger performance at PH to factors including: (1) greater inventory restock benefits - PH
                                            highlighted stronger distribution sales (positive margin mix) and we think pending price increases in October
                                            (Europe) and January (N. America) to counter material inflation may be driving customers to over-build some
                                            component stock near term, (2) greater operating leverage resulting from 2009 cost cutting and ongoing
                                            productivity discipline, and (3) share gains. We have not been positive enough on PH (+39% YTD vs. +16%
                                            for the group); we under-estimated revision strength and over-estimated early-cycle multiple compression
                                            risk. We see new guidance as still beatable, though consensus likely gets more aggressive as well. Balance
                                            sheet optionality is among the best in the group, though the impact is more likely 2012 than 2011. On
                                            balance, longer-term risk/reward has clearly improved, though near-term profit-taking across the group may
                                            create a better entry point down the line.
                                            Valuation
                                            We raise our 12-month target from $76 to $92 (14x CY2011 EPS of $6.53 vs. $5.43 previously).
                                            Key risks
                                            Upside risks include share gains and accretive M&A while downside risks include value gap and customer
                                            destock in 1HCY11.



Waste Connections, Inc. (WCN): First Take: 3Q10 EPS beats consensus on stronger volume, margins                                                         24

WCN, $40.05                                 Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
Market cap                   $3,151 mn
                                            Goldman Sachs & Co.
                                            Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
Target price                      $40.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
EPS ($)                    1.87     2.20    Goldman Sachs India SPL
P/E                       21.5X    18.2X

EPS Quarter/Interim
                      *
                           0.53     0.44
                                            News
                                            Waste Connections (WCN) reported 3Q2010 EPS of $0.53, beating consensus expectations of $0.51, but in
Investment Lists                            line with our estimate. WCN’s 3Q2010 results exceeded management’s revenue and EBITDA expectations
                                  Neutral   on significantly stronger volume growth. WCN reported volumes increased 3.2% yoy in 3Q2010 compared to
Coverage view                     Neutral   their initial forecast of 0.5%-1.0% growth. WCN also announced a 3-for-2 stock split and initiated a quarterly
                                            dividend of $0.075 per share for shareholders of record on October 29, 2010. We had not been expecting
*Current and a year ago                     WCN to initiate a dividend.
                                            Analysis
                                            Operationally, WCN had a very strong quarter, reporting record revenue and EBITDA. WCN’s 3Q2010




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                 October 20, 2010



                                           revenue and EBITDA exceeded our forecasts by 1.3% and 1.7%, respectively, as volume growth was
                                           significantly higher than expected (+3.2% vs. our estimate of +1.8%). WCN’s pricing was +2.6% yoy – inline
                                           with our forecasts. WCN reported it’s highest ever EBITDA margin at 32.9% vs. our estimate of 32.7%.
                                           Despite WCN’s operating results exceeding our forecasts, WCN reported 3Q2010 EPS that was inline with
                                           our $0.53 estimate as WCN’s tax rate was 124 bps higher than expected. We estimate the higher tax rate
                                           negatively impacted EPS by $0.01 relative to our forecast. Most important, WCN generated $67 million of
                                           free cash flow in the quarter, which the company used to buy back $33 mn of stock, pay down $23 mn in
                                           debt, and spend $14 mn on acquisitions.
                                           Implications
                                           We view WCN’s 3Q2010 results, stock buyback and dividend increase as a positive for the stock as it shows
                                           solid waste volumes have turned positive, demonstrates WCN’s focus on returning cash to shareholders as
                                           well as ability to continue to grow the business. We see the better than expected volume growth as a positive
                                           read-across to other solid waste companies: Republic Services and Waste Management. Our EPS estimates
                                           and price target are unchanged. WCN will host its 3Q2010 conference call at 8:30AM (ET) Wednesday
                                           morning.



Illinois Tool Works (ITW): Lackluster 3Q vs. expectations; maintain Neutral                                                                          25

ITW, $46.48                                Terry Darling (New York): terry.darling@gs.com, (212) 357-0379
Market cap                 $23,533 mn
                                           Goldman Sachs & Co.
                                           Adam Samuelson (New York): adam.samuelson@gs.com, (212) 902-6764
Target price                     $50.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Eddie Szeto, CFA (New York): eddie.szeto@gs.com, (212) 357-3320
EPS ($)                   3.12     3.70    Goldman Sachs & Co.
                                           Ankit Rastogi (Bangalore): ankit.rastogi@gs.com, (212) 934-6798
P/E                    14.9X      12.6X
                                           Goldman Sachs India SPL
EPS Quarter/Interim*      0.83     0.98

Investment Lists
                                           What's changed
                                 Neutral   ITW 3Q10 EPS of $0.83 included $0.02 of favorable corporate items and a $0.01 gain on a divestiture that
Coverage view                Attractive    enabled a $0.01 headline beat vs. GS/ consensus. Revenues were in line with our estimate and op. profit
                                           excluding favorable corporate items was 1% light. Guidance was $0.72-$0.84. Segment performance above
*Current and a year ago
                                           our estimates were Transportation (+$0.01 on stronger auto production and cost cutting benefits) and Food
                                           Equipment (+$0.02 on stronger margins also resulting from cost cutting). Power Systems (-$0.01 on weaker
                                           margins) and Construction Products (-$0.01 on weaker revenues resulting from softer resi activity and
                                           margins) were below our estimates, with other segments in line. ITW adjusted 2010 EPS guidance to $3.03-
                                           $3.11 from $2.86-$3.12 (adding back $0.04 1Q charge), with 4Q expected at $0.74-$0.82 vs. prior
                                           GS/consensus of $0.82/$0.79. We are raising our 2010-12 EPS estimates to $3.12/ $3.70/ $4.35 from $3.10/
                                           $3.60/ $4.25 due to stronger 3Q results in 2010 and FX benefits in 2011-2012. Our 12-month price target
                                           remains at $50 (13.5X 2011E P/E vs. 14X previously on above-average early cycle exposure).
                                           Implications
                                           Despite the 5.5% sell-off on Tuesday, we maintain our Neutral rating on ITW shares, as we continue to prefer
                                           valuation risk/reward, portfolio exposures, and balance sheet optionality in other names in our sector. We
                                           expect sentiment to remain muted near term in the absence of a reacceleration in ITW’s early cycle end
                                           markets (auto, residential construction) to drive estimate revisions.
                                           Valuation
                                           ITW is trading at 14.9X/12.6X 2010E/2011E P/E, -7%/-7% to peers vs. a historical range of -15% to +20%.
                                           Key risks
                                           Upside risks include stronger/weaker early-/late-cycle end markets. Downside risks include value gap and
                                           M&A integration.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                  October 20, 2010




Lockheed Martin Corp. (LMT): Numerous challenges highlighted in 3Q10; reiterate CL-Sell                                                               26

LMT, $69.47                                 Noah Poponak, CFA (New York): noah.poponak@gs.com, (212) 357-0954
Market cap                  $25,280 mn
                                            Goldman Sachs & Co.
                                            Chun-Yai Wang (New York): chun-yai.wang@gs.com, (212) 902-9610
Target price                      $63.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Alexandria Carroll (New York): alexandria.carroll@gs.com, (212) 902-7894
EPS ($)                    7.00     6.25    Goldman Sachs & Co.
P/E                        9.9X    11.1X

EPS Quarter/Interim
                      *
                           2.07     2.17
                                            What's changed
                                            LMT reported 3Q10 segment operating profit below our estimate, reduced 2010 EPS guidance, and provided
Investment Lists                            color on 2011 that implied significant downside to consensus estimates.
          Americas Conviction Sell List     We continue to believe the market does not fully appreciate that Defense fundamentals are slowly
                    Americas Sell List      deteriorating and could continue to do so for an extended period of time. On the call, LMT management
Coverage view                 Cautious      continuously referred to this period as a short-term challenge that would be followed by a reacceleration in
*Current and a year ago
                                            growth. Our view is that Defense fundamentals have only just begun to roll over and that the history lesson
                                            tells us that, once they do, it can be a long time before they bottom and improve again, given the slow and
                                            bureaucratic nature of DoD spending/contracting.
                                            Implications
                                            3Q10 EPS of $1.55 compared to consensus of $1.53 and GS of $1.52 (but included a net-$0.09 benefit vs.
                                            GS from lower VESP + higher Other - removal of EIG). Backlog declined qoq for the seventh consecutive
                                            quarter, with book-to-bill at 0.80 (0.88 TTM). Cash was a clear bright spot with FCF/NI of 2.5X (ex the
                                            pension contribution). 2010 EPS guidance was reduced to $6.75-6.95 (below consensus of $7.05) from
                                            $7.15-7.35, but due to the EIG divestiture and not to operations. 2011 directional commentary of low-single-
                                            digit revenue growth, flat segment operating profit, and $1.2 bn of FAS/CAS expense implies about 15%
                                            downside to consensus. We lower our 2011/2012E to $6.35/$7.80 from $6.50/$7.95 largely on FAS/CAS,
                                            and our 12- month price target to $63 from $65, given lower estimates.
                                            Valuation
                                            Our 12-month target price of $63 is based on our target relative P/E multiple methodology for Defense
                                            companies.
                                            Key risks
                                            (1) capital deployment, (2) geopolitics, and (3) defense spending priorities.



Crown Holding, Inc. (CCK): Solid 3Q results; Buy on accelerating volume growth, strong FCF                                                            27

CCK, $30.62                                 Richard Skidmore, CFA (New York): richard.skidmore@gs.com, (212) 357-5509
Market cap                   $4,967 mn
                                            Goldman Sachs & Co.
                                            Alex Ovshey (New York): alex.ovshey@gs.com, (212) 902-6751
Target price                      $36.00
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Usha Chundru (Bangalore): usha.chundru@gs.com, (212) 934-5057
EPS ($)                    2.25     2.80    Goldman Sachs India SPL
P/E                       13.6X    10.9X

EPS Quarter/Interim*       0.43     0.27
                                            What's changed
                                            Crown (CCK) reported 3Q2010 EPS of $0.85 (ex. items), slightly below our $0.86 estimate but better than
Investment Lists                            consensus of $0.83. Stronger-than-expected EBIT margins were offset by higher interest expense and tax
                      Americas Buy List     rate vs. our estimate. CCK reported global beverage can volume growth accelerated to 11% yoy in 3Q2010,
Coverage view                     Neutral   up from 4.5% and 8% yoy growth in 1Q and 2Q2010, respectively, primarily owing to greater ramp up of new
                                            capacity in the emerging markets, and solid volume gains in N.A. and Europe. CCK raised its 2010 free cash
*Current and a year ago
                                            flow (FCF) outlook to at least $425 mn (was $400 mn). CCK repurchased $105 mn of stock in 3Q, reducing
                                            the share count by 2%.
                                            Implications
                                            We trim our 2010 EPS estimate to $2.25 from $2.28 to reflect 3Q2010 and slightly higher 4Q interest
                                            expense. Our 2011 and 2012 EPS estimates of $2.80 and $3.25 are unchanged, respectively. We reiterate
                                            our Buy rating on CCK, as (1) we see 24% yoy EPS growth in 2011 driven by robust global beverage can
                                            volume growth, lower share count, and favorable FX; our 2011 EPS forecast is 12% above consensus, (2)




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 20, 2010



                                           FCF generation is strong, and (3) valuation is compelling. We like CCK, as it is well positioned to increase its
                                           return of cash to shareholders (via stock buybacks), given its strong FCF profile, low leverage, and favorable
                                           debt maturity schedule.
                                           Valuation
                                           We see 18% upside to our new $36, 12-month, DCF-based price target (was $33). We raise our price target
                                           as we roll forward our 10-year DCF model by one year to reflect forecasted net debt levels at the end of
                                           4Q2011 vs. 4Q2010 previously. CCK trades at 10.9X 2011E EPS, a discount to its peer average of 11.3X
                                           and its five-year average forward P/E of 14.2X despite a stronger EPS growth profile.
                                           Key risks
                                           Weaker global beverage can volume growth, less supply discipline in beverage and food cans, higher share
                                           count due to less share buyback.



Technology

Juniper Networks, Inc. (JNPR): Buy on the pullback: Street EPS going up on strong secular growth                                                         28

JNPR, $30.54                               Simona Jankowski, CFA (San Francisco): simona.jankowski@gs.com, (415) 249-7467
Market cap                 $16,459 mn
                                           Goldman Sachs & Co.
                                           Kent Schofield (San Francisco): kent.schofield@gs.com, (415) 249-7489
Target price                     $32.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Erin Riley (San Francisco): erin.riley@gs.com, (415) 249-7453
EPS ($)                   1.00     1.36    Goldman Sachs & Co.
P/E                    30.5X      22.5X

EPS Quarter/Interim*      0.31     0.27
                                           What's changed
                                           Juniper reported F3Q (Sep.) revenue/non-GAAP EPS at $1,012mn/$0.32 vs. GS at $1,038mn/$0.32 and the
Investment Lists                           Street at $1,024 mn/$0.32. It guided for 4Q sales of $1,120 +/- $20mn, above GS/Street at
                    Americas Buy List      $1,114mn/$1,101mn, and EPS of $0.35-0.37 (including $0.01 in incremental opex from recent M&A that was
          Americas Conviction Buy List     not modeled by us or consensus), vs. GS/Street at $0.38/$0.35.
Coverage view                    Neutral   Implications
*Current and a year ago                    We see this week’s pullback as a particular buying opportunity and reiterate our CL-Buy on the stock. We
                                           think this 3Q will differentiate true secular growers from those that have merely benefited from the cyclical
                                           snap-back of the last five quarters, and Juniper stands out by guiding ahead of consensus where others
                                           (e.g., Infinera) have stumbled. While sales in the quarter were a touch light on some federal push-outs into
                                           4Q, MX3D supply constraints, and softness in Europe, all the forward-looking underlying business metrics
                                           were strong: (1) book-to-bill ratio well above 1.0, (2) product backlog up 25% qoq, (3) deferred revenue up
                                           2% qoq in the seasonally slow quarter (five-year average of 1%). There is no change to our above-
                                           consensus non-GAAP estimates, with our FY11 EPS suggesting about 10% upside to Street estimates.
                                           Valuation
                                           There is no change to our 12-month price target of $32 based on a 27X P/E multiple on our normalized EPS
                                           estimate of $1.20, implying 19X our CY11 non-GAAP EPS estimate of $1.65.
                                           Key risks
                                           Risks include greater pricing pressure, slower-than-expected service provider routing growth, and higher-
                                           than-expected opex.
                                           Impact on related securities
                                           The federal push-outs may have also affected F5 and Riverbed, whose 3Q09 exposure to the government
                                           vertical was 29% and 15%, respectively.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                October 20, 2010




Yahoo! Inc. (YHOO): First Take: Heavy buybacks, light 4Q2010 net revenue guide                                                                      29

YHOO, $15.93                                James Mitchell, CFA (New York): james.mitchell@gs.com, (212) 357-1849
Market cap                  $22,140 mn
                                            Goldman Sachs & Co.
                                            Ingrid Chung (New York): ingrid.chung@gs.com, (212) 902-2360
Target price                      $17.50
                                            Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E     Jordan Monahan (New York): jordan.monahan@gs.com, (212) 902-1879
EPS ($)                    0.92     1.10    Goldman Sachs & Co.
                                            Fred Krom (New York): fred.krom@gs.com, (212) 902-8618
P/E                       17.4X    14.5X
                                            Goldman Sachs & Co.
                      *
EPS Quarter/Interim        0.24     0.16

Investment Lists
                                            News
                                  Neutral   Yahoo!’s 3Q gross revenue was in line with our estimate, up 2% yoy but 1% below the mid point of guidance.
Coverage view                 Attractive    Owned and operated (O&O) search revenue was down 7% yoy/flat qoq versus our -6% yoy/+1% qoq
                                            estimate, with yoy declines improving only 100 bp from last quarter against a 400 bp easier comparison.
*Current and a year ago
                                            O&O display revenue decelerated fractionally to +17% yoy from +19% in 2Q on a 600 bp tougher comp and
                                            was -1% qoq. TAC as a proportion of gross revenue increased 160 bp yoy to 29.8%. EBITDA of $408 mn
                                            was 1% below our estimate. G&A was 3% above our estimate, while sales & marketing were 3% below our
                                            estimates, and operating income of $276 mn was 5% above the mid-point of guidance but 4% below our
                                            estimate due to depreciation and a $6 mn restructuring charge. Free cash flow of $250 mn was below our
                                            $353 mn forecast on weaker operating cash flow and capex of $164 mn compared with our $149 mn
                                            forecast. Yahoo! repurchased $868 million of stock (62.5 mn shares) in the quarter, 4% of shares
                                            outstanding. Headcount was flat qoq at 14,100.
                                            Analysis
                                            (1) Page views were down 4%, in-line with the decline last quarter.
                                            (2) Revenue guidance was below our forecasts. At the midpoint, the company guided for 4Q2010 net
                                            revenue (ex-TAC) of $1.18 bn, 3% below our estimate and 7% below consensus. It guided for 4Q2010 GAAP
                                            revenue of $1.465 bn, below our $1.688 bn estimate mostly because Yahoo! will now exclude TAC of $210
                                            mn from its GAAP revenue. It guided for GAAP operating income of $200-$280 mn, versus our $263 mn
                                            estimate. We view guidance as potentially conservative given upside to RPS from the Microsoft alliance.
                                            Implications
                                            Our rating and price target remain unchanged; we await further details on Yahoo!’s earnings call this
                                            evening.



Solera Holdings, Inc. (SLH): Raising estimates on FX; positive takeaways from mgmt meetings                                                         30

SLH, $43.85                                 Vincent Lin (New York): vincent.lin@gs.com, (212) 934-0510
Market cap                   $2,938 mn
                                            Goldman Sachs & Co.
                                            Julio C. Quinteros Jr. (San Francisco): julio.quinteros@gs.com, (415) 249-7464
Target price                      $46.00
                                            Goldman Sachs & Co.
Fiscal y/e Jun            2011E   2012E     Snigdha Sharma (Bangalore): snigdha.sharma@gs.com, (212) 934-5056
EPS ($)                    1.55     1.85    Goldman Sachs India SPL
                                            Dennis Sevilla (San Francisco): dennis.sevilla@gs.com, (415) 249-7434
P/E                       28.2X    23.7X
                                            Goldman Sachs & Co.
EPS Quarter/Interim*       0.35     0.33

Investment Lists
                                            What's changed
                                  Neutral   We raise our estimates on higher revenues and margins driven by updated FX assumptions, following the
Coverage view                     Neutral   recent weakening of the USD, most notably against the Euro (+7% last 3 months; 45% of SLH’s revenue).
                                            Our FY11/FY12/FY13 EPS are now $1.55/$1.85/$2.13 from $1.47/$1.74/$1.99 prior; excluding stock comp
*Current and a year ago
                                            and intangibles, our adjusted EPS are now $2.25/$2.49/$2.73. Reflecting our revised estimates, we are
                                            raising our 12-month price target to $46 (from $43), suggesting 5% upside. We also recently hosted meetings
                                            with SLH’s management and provide the key takeaways in this report.
                                            Implications
                                            We remain positive on SLH’s global positioning in the auto insurance claims industry and high margin
                                            leverage. While execution is key, we see the company’s long-term revenue target of $1 bn (12% CAGR) and




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 20, 2010



                                           EBITDA target of $400-$450 mn (11%-14% CAGR) by FY14 as achievable, supported by (1) an improving
                                           global macro backdrop, (2) the secular adoption of automated services and sustained claims growth in its
                                           evolving/emerging markets, (3) expanding revenue opportunities through introduction of new services and
                                           targeted M&A, and (4) further EBITDA margin expansion of 100-150 bp annually. We maintain our Neutral
                                           rating on valuation, with the shares trading at 18X our CY11 adjusted EPS vs. estimated long-term EPS
                                           growth of 15%. Near term, we view sustained improvement in organic growth as key in driving share
                                           performance.
                                           Valuation
                                           Our 12-month price target of $46 is based on a weighted average model incorporating a sector-relative
                                           investment framework, CY11 P/E, and EV/EBITDA multiples; it implies a CY11 P/E of 19X our adjusted EPS.
                                           Key risks
                                           Downside: Lower volume growth, slower service adoption, and FX volatility. Upside: Higher revenue growth
                                           and/or margins.



Altera Corp. (ALTR): Significant downside to 2011 Street estimates, prefer ALTR to XLNX                                                                 31

ALTR, $29.50                               James Schneider, Ph.D. (New York): james.schneider@gs.com, (917) 343-3149
Market cap                  $9,354 mn
                                           Goldman Sachs & Co.
                                           James Covello (New York): james.covello@gs.com, (212) 902-1918
Target price                     $26.00
                                           Goldman Sachs & Co.
Fiscal y/e Dec         2010E     2011E     Gabriela Borges (New York): gabriela.borges@gs.com, (917) 343-0368
EPS ($)                   2.46     2.10    Goldman Sachs & Co.
P/E                    12.0X      14.1X

EPS Quarter/Interim*      0.68     0.34
                                           What's changed
                                           Altera reported 3Q sales of $527 mn (+12% qoq), in line with GS at $531 mn and the Street at $526 mn and
Investment Lists                           at the midpoint of revised guidance of +10% to +14% qoq. Operating EPS of $0.69 was ahead of GS at
                                 Neutral   $0.68 and the Street at $0.65 on lower opex and taxes partly offset by a lower gross margin. The telecom &
Coverage view                Attractive    wireless segment delivered the strongest growth, up 21% qoq. 4Q guidance is for sales to be up 3% to 6%
                                           qoq ($543 mn-$559 mn), with turns in the mid 20% range. The midpoint of $551 mn is well above our prior
*Current and a year ago
                                           $508 mn and the Street at $512 mn, with a gross margin of 70%-71%, R&D of $65 mn-$66 mn, and SG&A of
                                           $61 mn-$62 mn. For 4Q, Altera expects telecom to be up (driven by wireless) with networking/ computing up
                                           and industrial/military/auto and Other flat to slightly down.
                                           Implications
                                           Despite Altera’s best-in-class execution, we see significant downside to Street estimates for 2011 as (1)
                                           comms revenue is running 25%-35% above normalized levels even after accounting for aggressive PLD
                                           content gains, (2) carrier capex is expected to be down 5% in 2011, with negative seasonality in 1H2011. We
                                           are thus cautious on the stock but prefer it to Xilinx (Sell, $26.34) as Altera continues to execute better than
                                           Xilinx and has more favorable end-market exposure. Within the comms vertical, we prefer names such as
                                           PMC-Sierra (where we think Street estimates already reflect an inventory correction at comms OEM
                                           customers), or those with exposure to multiple secular growth themes such as Broadcom (smartphones,
                                           mobile backhaul, tablets). Adjusting near-term estimates slightly on higher revenue: 2010 to $2.46 from
                                           $2.40, 2011/2012 unchanged at $2.10/$2.15.
                                           Valuation
                                           Our six-month price target in unchanged at $26, and is based on a 15X multiple applied to our normalized
                                           EPS estimate of $1.75.
                                           Key risks
                                           Risks include excess inventory and stronger-than-expected capex trends.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                    October 20, 2010



Telecom Services

NII Holdings (NIHD) Buy: Attractive entry point; upgrade to Buy, add to LatAm Focus List                                                                32

NIHD, $36.60                               Lucio G. Aldworth (Sao Paulo): lucio.aldworth@gs.com, +55(11)3371-0726
Market cap                   $6,266 mn
                                           Goldman Sachs Brasil Bco Múlt S.A.
                                           Andre Rezende (Sao Paulo): andre.rezende@gs.com, +55(11)3371-0766
Target price                      $47.90
                                           Goldman Sachs Brasil Bco Múlt S.A.
Fiscal y/e Dec            2010E   2011E

EPS ($)                    2.17     2.78   Source of opportunity
P/E                       16.9X   13.2X    We upgrade Nextel International (NIHD) to Buy from Neutral on weakness, as we now see 31% upside to our
                      *                    unchanged 12-month price target of $47.90. NIHD and Televisa announced on October 18 the termination of
EPS Quarter/Interim        0.69     0.70
                                           their JV for 3G mobile in Mexico. Since press reports suggested last week the JV might be cancelled, NIHD
Investment Lists                           shares are down 15% (vs. S&P 500 -1%). Without a cash injection from Televisa, we believe NIHD still has
                      Americas Buy List    the resources to deploy wireless data in Mexico and thus capture 100% of this growth. We also add NIHD to
Coverage view                 Cautious
                                           our LatAm Focus List, replacing Brazilian mobile operator Vivo (VIVO4.SA).
                                           Catalyst
*Current and a year ago
                                           NIHD is scheduled to report 3Q on October 28 – we see 23% yoy revenue growth and EBITDA up 20% from
                                           3Q2009. At 5.0X 2011E EV/EBITDA, we believe EBITDA growth alone should carry the stock to close to our
                                           target price, even if the multiple remains stable. NIHD is up 17% since its Feb. low, in line with the improving
                                           equity-market conditions (S&P 500 +9%) and favorable FX (LatAm currencies +7%), so that growth and the
                                           fact that it now owns much-needed spectrum do not seem to be priced in. Lastly, NIHD’s low leverage (net
                                           debt/EBITDA of 0.9X in 2Q10) and strong EBITDA should make it self-sufficient for the roll-out of 3G in
                                           Mexico and Brazil.
                                           Valuation
                                           Our 12-month EV/EBITDA-based target price remains unchanged at $47.90, as do our estimates, since we
                                           had not incorporated the proposed deal in our model. At current levels, NIHD trades at a 6% discount to
                                           emerging-market wireless peers on a 2011E EV/EBITDA basis, despite growing twice as fast – NIHD’s
                                           multiple is now 21% below its three-year average.
                                           Key risks
                                           Major risks involve the legal dispute over license in Mexico, competition in Brazil’s upcoming spectrum
                                           auction, economic environment and FX rates.



Latin America: Telecom Services: Positioning for 3Q10: 3G driving mobile growth; fixed-line/integrated                                                  33
struggling

                                           Lucio G. Aldworth (Sao Paulo): lucio.aldworth@gs.com, +55(11)3371-0726
                                           Goldman Sachs Brasil Bco Múlt S.A.
                                           Andre Rezende (Sao Paulo): andre.rezende@gs.com, +55(11)3371-0766
                                           Goldman Sachs Brasil Bco Múlt S.A.

                                           Data continues driving mobile growth
                                           With 3G going mainstream in LatAm, data-related services are quickly becoming mobile operators’ biggest
                                           growth contributor. On average, pure mobile operators Vivo and TIM should grow service revenues 10% yoy
                                           in 3Q2010, with data contributing 7 pp of that. Last quarter, data was 17% of their service revenues and grew
                                           at an average yoy pace of 47%. Vivo and TIM are fully exposed to the mobile market and to Brazil’s growth
                                           potential on mobile data, given pent-up demand for broadband and insufficient fixed-line coverage.
                                           AMX now integrated, not a pure mobile
                                           LatAm’s largest wireless carrier, AMX, will start to consolidate figures with fixed-line carrier TMX and long-
                                           distance/pay-TV operator TII in 3Q. We expect this to reduce reported growth rates by around 3 pp and
                                           EBITDA margins by 3 pp, before synergies. AMX is up 14% since September 1 and trades at 6.1X 2011E
                                           EV/EBITA, a 23% premium to an average of global telcos – we remain Neutral.
                                           TIM: Strong net adds & improving margins
                                           We expect TIM Brazil to report the best yoy EBITDA margin gain among wireless telcos we cover, up 220 bp
                                           to 25.3% in 3Q. This is despite the expected record level of net adds (2.1 mn) in the quarter, which should




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                   October 20, 2010



                                          help it narrow the market-share gap to Claro. We maintain our Buy rating. Starting in 4Q, TIM should start
                                          reporting in IFRS – this accounting change should add 200/300 bp to reported margins.
                                          Vivo earnings up on lower depreciation
                                          We also reiterate our Buy rating on Vivo, Brazil’s largest mobile operator. Vivo has concluded the accelerated
                                          depreciation of its CDMA network, so that depreciation charges should drop 23% qoq. This, along with
                                          recurring EBITDA growth of 10% yoy, should fuel 48% yoy earnings growth.
                                          FX still pushing NIHD reported growth
                                          Push-to-talk specialist NIHD should grow sales 23% yoy, after a 3pp push from FX. With EBITDA expected to
                                          growth 20% yoy, and an 8% discount to emerging market telcos, we reiterate our Buy.



Transportation

LLX Logistica (LLXL3.SA): Focus now on the Açu Port; keep Neutral rating on LLX                                                                        34

LLXL3.SA, R$8.80                          Eduardo Siffert Couto, CFA (Sao Paulo): eduardo.couto@gs.com, +55(11)3371-0764
Market cap                R$6,095 mn
                                          Goldman Sachs Brasil Bco Múlt S.A.
                                          Tais Correa (Sao Paulo): tais.correa@gs.com, +55(11)3371-0833
Target price                    R$9.60
                                          Goldman Sachs Brasil Bco Múlt S.A.
Fiscal y/e Dec         2010E    2011E

EPS (R$)               (0.15)    (0.40)   What's changed
P/E                        --        --   We update estimates for 2Q2010, a stronger BRL and capex delays at the Açu Port with a small positive
                                          impact on 2010/11/12E EPS. Our 12-month target price of R$9.60 (from R$9.50) still includes the Sudeste
EPS Quarter/Interim*   (0.06)     0.00
                                          Port as its sale to MMX needs shareholder approval (expected in November 2010).
Investment Lists
                                          Implications
                                Neutral   If approved by shareholders, the Sudeste Port will be sold to MMX for US$441 mn in cash (or MMX shares)
Coverage view               Attractive    plus a perpetual royalty bond that receives US$5/ton of future iron ore loaded in the Sudeste Port. Using our
                                          unchanged DCF valuation of Açu, we calculate that LLX’s current price is implying a valuation for the royalty
*Current and a year ago
                                          bonds of US$1.2 bn, equivalent to a 14% yield in real dollar terms. Factors affecting these bonds will include
                                          (1) uncertainty over port volumes; (2) uncertain liquidity; and (3) possible restrictions for equity holders to
                                          hold the bonds.
                                          The Açu Port will be LLX’s only project after the Sudeste sale. In our view, the Açu Port is riskier, handling
                                          different products with potential delays. The Açu Port is scheduled to start up in 2012 but the steelmakers
                                          Ternium and Wisco are still studying the area, and timing for the mills is unclear. It is also uncertain whether
                                          the OSX shipyard will use the Açu Port and talks with oil makers for blending units are preliminary. Anglo has
                                          announced a two-year delay in the ore pipe, and rail access to Açu is still in discussion with transportation
                                          authorities and railroad operators.
                                          Valuation
                                          We maintain our Neutral rating with 6% upside to our DCF-based 12-month price target. Excluding the
                                          Sudeste Port, 74% of LLX’s value comes from the Açu industrial complex (22% area leasing, 16% steel, 8%
                                          coal, 22% oil, 5% others) where project visibility is still low.
                                          Key risks
                                          Lower liquidity after the Sudeste sale and delays in the Açu Port are risks.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                        October 20, 2010



Utilities

American Electric Power (AEP): Ohio a concern but warming up on valuation and dividend hike                                                                   35

AEP, $36.52                                  Michael Lapides (New York): michael.lapides@gs.com, (212) 357-6307
Market cap                  $17,457 mn
                                             Goldman Sachs & Co.
                                             Neil Mehta (New York): neil.mehta@gs.com, (212) 357-4042
Target price                      $39.00
                                             Goldman Sachs & Co.
Fiscal y/e Dec            2010E   2011E      Jaideep Malik (New York): jaideep.malik@gs.com, (917) 343-0717
EPS ($)                    3.05     3.17     Goldman Sachs & Co.
P/E                       12.0X    11.5X

EPS Quarter/Interim
                      *
                           1.15     0.93
                                             What's changed
                                             After AEP’s 3Q reporting and analyst day, we update estimates to reflect assumptions for wholesale sales,
Investment Lists                             financings, dividend payouts, rate cases, and transmission growth. We update estimates for 2010/2011/2012
                                  Neutral    from $3.09/$3.13/$3.36 to $3.05/$3.17/$3.30 and 2013/2014 from $3.57/$3.73 to $3.48/$3.65. We maintain
Coverage view                     Neutral    our $39, 12-month price target, implying 11% return including a 4-5% dividend yield.
*Current and a year ago
                                             Implications
                                             Although AEP continues to improve returns across multiple jurisdictions, the shares generally trade at a
                                             discount to peers, likely on Ohio-related concerns, given the regulatory/rate-making process next year and
                                             the excessive earnings test (SEET).
                                             We emerge from the analyst day incrementally more positive on AEP, especially given a management-
                                             recommended 9.5% dividend increase. Potential negative catalysts remain, with Ohio staff testimony on the
                                             SEET coming later this week and hearings next week. We view the SEET process, potential turnover on the
                                             Ohio utility commission after the November elections, and next year’s rate proceeding as key for AEP.
                                             Valuation
                                             Our $39, 12-month target price for AEP implies 11% total return – and incorporates a 0.75X-1.0X P/E
                                             multiple discount for AEP versus other large-cap regulated utilities. AEP experienced an average discount of
                                             1.3X-1.4X versus large-cap regulated utilities over the last 3 to 5 years. Removal or a decrease in uncertainty
                                             in Ohio could lead to multiple expansion.
                                             Key risks
                                             Primary risks to our view and price target include a lower-than-expected recovery in power demand, rate
                                             case and regulatory risks, and project approvals and siting for key transmission initiatives.



Reports Published

                                            China: Portfolio Strategy: Surprise rate hike could trigger ST profit taking, but our 
                                            constructive view remains – buy on dips 

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expressed in this report.




Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                             October 20, 2010




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Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                               October 20, 2010



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Goldman Sachs Global Investment Research
Americas Morning Summary                                                                                                                                 October 20, 2010



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