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products), Group Insurance (including life, disability and long term care insurance products) and Large Case Pension (a legacy business which is largely in runoff}. Dover (DOV) Andrew Obin +1 646 855 1817 Research Analyst, MLPF&S Buy, PO $85 1Q investment thesis We think the Street is underestimating ’17 EPS upside potential from Energy recovery given the segment’s close correlation to N.A. rig count and short-cycle nature of the business, as well as incremental accretion from Wayne acquisition. DOV is expected to host an analyst dinner on January 12" which will provide a 4Q update and preview 2017 results. We think the meeting will be a positive catalyst for the stock, providing more visibility on Energy orders post-OPEC meeting, highlighting sustainability of the EMV cycle in Wayne into ’19. Investors will also likely get an update on execution turnaround in the Refrigeration business, removing one of the biggest overhangs on the stock. Table 1: Dover key stock data Industry Industrial Machinery Market Cap (mn) $11,921 Price $75.19 P/E (2017) 19.6x % of sell-side rated Buy 25.0% Short interest % of float 1.54% Source: Bloomberg and BofA Merrill Lynch Global Research estimates Deregulation/Gov’t Legislation: We expect Trump’s administration to prioritize US energy independence, with deregulation benefiting domestic shale produces, which should be an attractive tailwind to DOV’s Energy segment. Tax Policy: Our estimates are based on 29% tax rate in ‘17/18. We calculate that under Ryan’s proposed plan, we can see about 19% upside to EPS. We estimate that under Trump’s proposed plan, we can see about 24% upside to EPS. Catalysts: January 12" — investor dinner with management January 26" — 4Q results Rig count release Latest report: Dover Corp: Adjusting for Wayne, EMV cycle extension; Rig count going up, LIl read-across 1Q risks: With so much of DOV’s EPS upside tied to Energy segment recovery, we view oil price volatility (from stronger USS or other unexpected macro headlines) as the biggest risk to our thesis. Weaker-than-expected execution in Refrigeration or Fluid business would be another risk, offsetting Energy upside. Bankof America 4 Top 10 US Ideas Quarterly | 03 January 2017 Merrill Lynch HOUSE_OVERSIGHT_014625