Upgrading Our Growth Forecast for Becton, Dickinson

We're raising our fair value estimate for

The essential nature of BD's medical products has given the firm ample cash flows for reinvestment in areas such as diabetes, injectables, and biosciences. The company has also built out massive presence in emerging markets, with its distribution and manufacturing network unparalleled in the med tech world. The acquisition of CareFusion was a culmination of the firm’s transformative efforts over the past few years, and the ultimate payoff of this transaction--profitable growth--is becoming evident. CareFusion's product suite provided many complementary opportunities to BD’s own products, which should yield revenue synergies worldwide, particularly in emerging markets, where CareFusion’s presence has historically been lacklustre.

CareFusion also gives BD an opportunity to apply its penchant for running efficient operations to squeeze CareFusion’s bloated infrastructure. Cost synergies here aren’t just management-speak but are instead real, given CareFusion’s inefficient infrastructure. We estimate BD to exceed its conservative synergy guidance; coupled with incremental revenue opportunities, this should ultimately result in value accretion.

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