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Restricted - External U.S. Equity Product ManagementGroupTerence Malone*+ 1 212 526 7578terence.malone@barclays.comBCI, USAndrew Ferremi*+1 212 526 8257andrew.ferremi@barclays.comBCI, US manufacturing capabilities to makestufffor others, be it Nvidia or Apple. Foxconn now has over200factories/officesin 24 countries and regions and its impressive customer list includes Apple,Google, and all leading hyperscalers. To Jiong, this is primarily a volume, scale, and revenuegrowth story with stable margins. Because of its mostly buy-and-sell assembly model andalready extra-thin gross margins, he believestariffswill likely have a limited impact on thecompany’s margins as its customers will need to absorb whatever negative impact ensues fromtariffs.Lastly, from a shareholder-return perspective, the company pays out over 50% of itsearnings as an annual dividend, with a current dividend yield of around 4%.AT&T/Lumen: Wireline broadband M&A momentum is likely to keep building (05/22/2025). AT&Tannounced the acquisition of Lumen's Mass Markets business which, as Kannan Venkateshwarnotes, is consistent with AT&T's focus on scaling its fiber business to be the largest in thecountry at over 60mm post deal by 2030. The combined entity would have nearly 34mm fiberpassings and 10.7mm consumer fiber broadband subs. AT&T will pay $5.75bn all-cash, lowerthan the $6bn - $9bn valuation that had been reported shortlyafterLumen began the saleprocess late last year. In his view, the deal valuation is reasonable especially considering thefact that Lumen could have spent $6bn in capex building this fiber asset. On a per sub basis, thevalue is comparable to Cox's sale to Charter despite Cox's broadband subs declining, and capexneeds being higher than the assets AT&T is purchasing from Lumen. Overall, while thetransaction is small relative to AT&T scale, it further builds on the narrative momentum in thename, especially with respect to directional strategic clarity.U.S. Equity Insights: 1Q25 Earnings Learnings: Strong start to a weak year? (05/22/2025). Ashighlighted by Venu Krishna, more than 92% of the S&P 500 has reported 1Q25 results, and thedepth of EPS surprise has been well above the LT trend, while the breadth of EPS surprise wasalso impressive. In his view, earnings mirror the macro backdrop in terms of resilient hard datathat wasoffsetby weak survey data. Further, EPS beats did not drive material excess returns forshares, which suggests to him that the rebound has been largely beta-driven and is a result ofimproving overall sentiment rather than specific results/guidance. Valuations have also re-ratedsignificantly from YTD lows. To that end, Big Tech has retaken 27x, the rest of Tech 26x, and therest of SPX is trading at nearly 20x NTM EPS. In terms of the consumer, Venu notes that theencouraging results from Big Tech helped to allay fears, but signs of stress are appearing inconsumer results. On that point,tariffsare contributing to flattish net margin guidance for FY25and concerns around negative operating leverage for the upcoming quarter.U.S. Convertibles Strategy: Convert Defaults Held in Check Despite Uncertain Tides(05/22/2025). Venu Krishna notes that convertible default rates have declined meaningfullyfrom mid-2024 levels, and distressed exposure has moderated. Following a rise in overalldefaults to 1.4% in 2024, the 2025 year-to-date default rate has normalized to 0.3%, with fivedefault events recorded. Default exposure, defined as bonds trading below 60% of par, nowstands at 3.5%, down from 6.0% as of 1H24. Meanwhile, the number of distressed securities hasalso declined, with concentrations in the Information Technology and Industrials sectors. Whilethis reflects continueddifferentiationacross credit profiles, the contraction in defaulted anddistressed paper suggests a lower likelihood of broader credit stress in the asset class in thenear term. Moreover, bond-only convert defaults continue to trail those in the high-yieldmarket, reflecting the hybrid structure and structural flexibility inherent to the asset class.Macro and credit indicators also suggest improving stability, though selective credit monitoringremains essential. To that end, ashiftin issuance quality may help keep defaults contained, asthe COVID-era cohort now accounts for just 45% of outstanding converts. With these structurescontributing to over 80% of defaults since 2022, their continuedrunoff,combined with the assetclass’s hybrid structure and institutional investor alignment,offersa meaningful structuralbuffer.2 Intuitive Machines: Space Play That Has Landed Several Wins; Forecast 20-25% CAGR(05/22/2025). David Strauss initiates coverage of LUNR with an EW rating and $13 PT. He expectsLUNR to continue to benefit from NASA's increasing reliance on commercial companies. Thatsaid, while LUNR has compiled a strong track record of wins thus far, its focus areas areextremely competitive with its programs generally on fixed price terms where LUNR take