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Date: 12 November 2013 Jing Chen Hisham Haider Dewan Harout Sahakian

Date: 12 November 2013 Jing Chen Hisham Haider Dewan Harout Sahakian. Agenda. Company overview Holding i nformation Macro-economic overview Industry analysis Equity market expectations Financial analysis Financial projections Valuation tools Recommendation.

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Date: 12 November 2013 Jing Chen Hisham Haider Dewan Harout Sahakian

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  1. Date: 12 November 2013Jing ChenHisham Haider DewanHaroutSahakian

  2. Agenda • Company overview • Holding information • Macro-economic overview • Industry analysis • Equity market expectations • Financial analysis • Financial projections • Valuation tools • Recommendation

  3. Introduction to Abbott Laboratories Source: Abbott Investor Relation, Annual Report 2012

  4. Business Segments Source: Abbott Laboratories 10K filing page 1-5, 10Q Q3 FY2013 page 11

  5. Revenue Breakdown by Segment 2013 Source: Abbott Laboratories 10Q FY2013 Q3 page 11

  6. Where Does Abbott Sell? Source: Abbott Laboratories 10K FY2012 page 33

  7. Revenue by Segment Figures in $mil. Source: Bloomberg Revenue by segment for ABT US Equity

  8. Spin Off • In 2012, Abbott spun off its pharmaceutical segment into a publicly traded company, AbbVie, Inc. • Each shareholder of Abbott received one share of AbbVie, Inc. (NYSE: ABBV) Source: Abbott Laboratories 10K FY2012 page 1, AbbVie, Inc. 10K FY2012 page 1

  9. Current Holdings 400 shares • 4/27/11 - Bought 200 shares @ 52.05 • 11/08/11 - Bought 100 shares @ 52.91 • 12/11/12 - bought 100 shares @ 65.77 Total Purchase Price (adjusted for split) = $10,687 Current Market Value = $15,160 Holding period return = 41.85%

  10. Macro-economic Overview • Slowing growth in BRICS countries • Increasing number of physician visits1 • Adults aged 65 and over 13.7% of US population & rising • High birth rates in emerging markets • Increasing socio-economic status in emerging markets • Increasing emphasis on disease prevention • Changing regulatory environment Source: 1. IBISWorld Industry Report 33451b Medical Device Manufacturing in the US October 2013, page 4 2. US Census Bureau http://quickfacts.census.gov/qfd/states/00000.html

  11. Health Care Industry Source: OECD. Health Data 2013. Frequently Requested Data. http://www.oecd.org/els/health-systems/oecdhealthdata2013-frequentlyrequesteddata.htm

  12. Industry Growth in the US Sources: IBISWorld Industry Reports: a) Medical Device Manufacturing in 2013, b) Glucose Meter Manufacturing in 2011, c) Obesity Medication Manufacturing in the US in 2013, d) Laboratory Information Management Systems in 2013, e) Meal Replacement Product Manufacturing in 2011

  13. U.S. Forecast Sales Growth Source: Passport. Consumer health in the U.S. April 2013. Pg 20.

  14. Patient Protection & Affordable Care Act • Healthcare coverage available to all Americans • An attempt to keep costs lows • Changes how care is paid for • Annual Fee on “branded prescription pharmaceutical manufacturers and importers” • ABT no longer subject to such fees Source: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

  15. Risks to Abbott

  16. Industry Porter's Five Forces Analysis

  17. Life Cycle Source: http://marygardiner.wordpress.com/2013/05/28/product-cycles/

  18. SWOT Analysis of Abbott

  19. Recent Financial Performance • 2013 Q3 EPS $0.55 above consensus estimate of $0.51 • Decline in Nutritionals business because of Fonterra recall • MitraClip approved In U.S. • Diagnostics 3Q 2013, total diagnostic sales of $1,125M (+10.5%cc) • Established products third quarter sales grew 0.6% ex-currency (+0.7% YTD) • Medical Devices sales was up 3.9% reported Source: 1. http://www.nasdaq.com/earnings/report/abt ; Source 2: ABBV 8K filing

  20. Equity Performance Source: Google Finance Feb 06, 2013 to Nov 11, 2013

  21. Technical Analysis Source: Google Finance Feb 06, 2013 to Nov 11, 2013

  22. Quarterly Ratio Analysis Source: Capital IQ Ratios based on quarterly data

  23. Quarterly Ratio Analysis Source: Capital IQ Ratios based on quarterly data

  24. Valuation DCF, Comparable, Ben Graham’s formula

  25. Cost of Capital

  26. Free Cash Flow to Firm

  27. Discounted Cash Flow Value

  28. DCF – Sensitivity to WACC and Perpetuity Growth Rate

  29. Comparable Companies

  30. Comparable Analysis

  31. Benjamin Graham's formula

  32. Key Decision Driver Upside • Diversified portfolio of established products • Strong and growing international presence • Consistent growth in revenue and earnings Downside • Potential risk of litigation and product recalls • Prolonged regulatory approval process • Failure to deliver new products

  33. Recommendation Current stock price $37.90 as of Nov 11 , 2013 DCF $36.97 Comparable $39.56 Ben Graham $36.79 HOLD

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