BRIAN REYNOLDS ALEX MACK

1
Becton, Dickinson Company (BDX)

• GROUP 3
• BRIAN REYNOLDS ALEX MACK
• CHARLIE SHREVE ANNIE VAN ALLEN

2
Investment Thesis

• Expected Future Depreciation of U.S. Dollar
• Inelastic Products Result in Consistent Revenue
• Undervalued intrinsically by 16
• Strong Balance Sheet with Merely 7 Debt

3
Company Summary

• Current Price 65.25
• Market Cap 15.86 billion
• Headquarters Franklin Lakes, NJ
• Operations Manufactures and distributes medical
  devices, reagents, and instruments worldwide.
  
• Operates in 3 segments

BDX
BD Medical
BD Diagnostics
BD Biosciences
4
Industry Overview

• Company operates in three industries
• Medical Devices
• Outsourcing distribution
• Consolidation
• Diagnostics
• Globalization
• Bioscience Research Equipment
• Increased R D

5
Industry Overview

• Medical Devices Industry Players
• Diagnostics Industry Players

6
Comparative Advantages

• Strong Balance Sheet
• Low debt
• High cash
• Acquisition opportunities
• Limited Overall Risk
• Market diversity/global footprint
• Steady organic growth
• Foothold on HAI and Womens Health
• Recent acquisitions
• Pending FDA approval

7
Risks

• Foreign Currency
• If USD continues to appreciate
• Economic
• Suppliers
• Consolidation of Industry
• Increased price competition
• Crude Oil Price Volatility
• Significant increase in raw material prices

8
Income Statement/Assumptions

• Revenue
• Slow from 12.5 in 2008 to 11 in 2009
• Rebound to 12 in 2010
• Margins
• Gross 51.5
• Operating 21.7
• Profit 15.8
• Taxes
• 27.5

9
Cost of Capital (WACC)

• Given Credit Markets, Revised Upward

10
Valuation

• Discounted Cash Flow
• Terminal Value
• 3 Perpetual Growth 67
• TEV/EBITDA Multiple 80
• Comparable Companies
• Price/Earnings (ttm) 69
• Price/ Earnings, Forward (2010) 72

11
Summary

• Inelastic Demand for Products
• Recession-Proof
• Global Footprint and International
  Diversification
• Accelerating Research and Development
• Intrinsically and Relatively Undervalued 10-15
• Recommendation BUY