All rights reserved. And just when it looked like the industrial giant was going to finally depart, a nasty earnings announcement upended its flight plans.
Buyers returned, optimism improved, and the stock was poised for a solid start to Until earnings arrived to trash the turnaround, that is. The company also announced additional job cuts. The weekly trend shows 3M still stuck in a two-year descending channel. Until either level gives way, expect more of the same choppy to bearish behavior.
In the six days since its underwhelming report, the stock has fallen The shares are popping today buoyed by the rebound in the broader market, but with the sharp increase in momentum during its downswing, I suspect this is a rally that will fail. Rather than fishing for a bottom, I suggest using strength as an opportunity to build bearish trades from a better vantage point. Volume patterns are weighing in favor of a bearish view. Five of the past seven trading sessions saw distribution suggesting institutions are heavy sellers right now.
Color me skeptical that a multi-day bounce will change their disposition. Plus, with all the support zones shattered during the recent downswing, there are multiple resistance zones now looming overhead. Premium Services Newsletters. Sign out.
About Us Our Analysts. Compare Brokers. More from InvestorPlace. Sponsored Headlines. Subscriber Sign in. Sign in. Having trouble logging in?All rights reserved. Specifically, it increasingly appears that — once the coronavirus outbreak in China subsides and it will, soon — global economic activity will rebound sharply and quickly, especially in the industrial and manufacturing sectors.
At the same, management has announced significant restructuring and cost-cutting initiatives, the sum of which will drive margin expansion intoo. Recharged revenue growth and margin expansion will power reinvigorated profit growth at the industrial conglomerate. The better news for bulls?
3M Stock has Double-Digit Upside Potential as Industrial Growth Resumes
The stock presently trades at a five-year low valuation of just What do you get when reinvigorated profit growth converges on a five-year low valuation? A sharp jump in the stock price. When you take a step back and look at the big picture, it becomes increasingly obvious that the global industrial economy is set for a significant re-acceleration over the next few quarters.
Those closures are disrupting global supply chains, slowing manufacturing around the world thanks to the coronavirus. Soon enough, like all other epidemics, the coronavirus outbreak will pass.
Chinese factories and manufacturing sites will re-open. Global supply chains will be fixed, and the industrial economy will stop slowing. That provides ample firepower for a sharp economic rebound once virus fears subside.
Second, also partially in response to the coronavirus, China has been more open to trade negotiations with the U. Third, with stability set to be re-injected into the global geopolitical environment, corporations are set to re-accelerate their capital spending plans in Capital spending is the backbone of the industrial economy.
Thus, as capital spending trends improve on the back of easing trade tensions, industrial economic activity will rebound. Fourth, the industrial economy was already rebounding prior to the coronavirus outbreak. Just look at Purchasing Managers Index readings from across the globe in the back half of and into January. They were rebounding, everywhere, because of supportive central bank policies and easing trade tensions.
Come mid, there will be more fiscal stimulus and more trade tension de-escalation, so this rebound will likely kick into second gear. Given that the industrial economy is set to rebound in3M stock is simply too cheap for its own good here and now.
When that happens, the current discount in the stock should disappear. So, throughout3M stock should power higher, supported by renewed profit growth and steady multiple expansion. How much firepower does this rally have? But once coronavirus fears subside, those sluggish industrial growth trends should materially improve on the back of easing trade tensions and supportive monetary policy. As of this writing, Luke Lango did not hold a position in any of the aforementioned securities. Premium Services Newsletters.
Sign out. About Us Our Analysts. Compare Brokers. More from InvestorPlace. Sponsored Headlines. Subscriber Sign in. Sign in.This segment serves transportation and electronic original equipment manufacturer customers. The Health Care segment offers medical solutions, oral care, separation and purification sciences, health information systems, drug delivery systems, and food safety products.
The Consumer segment provides home improvement, home care, and consumer health care products, as well as stationery and office supplies. This segment is also involved in the retail auto care business.
The company serves automotive, electronics and automotive electrification, appliance, paper and printing, packaging, food and beverage, construction, medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, food manufacturing and testing, consumer and office retail, office business to business, home improvement, drug and pharmacy retail, and other markets. Paul, Minnesota. Yahoo Finance. Sign in. Sign in to view your mail.
Finance Home. Currency in USD. Add to watchlist. Market open. Summary Company Outlook. Amounts are as of December 31, and compensation values are for the last fiscal year ending on that date. Pay is salary, bonuses, etc. Exercised is the value of options exercised during the fiscal year. Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk.
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Nicholas C. Michael G. Vale Ph. Ashish K. Theresa E. VP, Corp.The company is not in a great place right now, and management has its work cut out to turn things around. That said, the stock's 3. On the other hand, the underlying figures were pretty much in line with guidance.
3M Company (MMM)
In fact, it should be welcomed as a reflection of management's determination to turn around performance. CEO Mike Roman argued it was "really the next phase of our transformation journey, and it's taking advantage of everything that we've done. Frankly, something needed to be done, because 3M's performance in the last few years has been disappointing to say the least. The criticisms can be put into three buckets.
First, management's guidance has proved inaccurate in the past. Three of the last five years have seen growth come in below the range of management's original forecast.
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And this has eroded investors' confidence in a company that previously commanded a valuation premium to its peers. Second, its consumer and healthcare segments have consistently fallen short of expectations.
To put this into context, here's what CFO Nick Gangestad has targeted on the last two investor days in and Data source: 3M. This is important because 3M's business model involves spending on innovation in order to produce differentiated products that have pricing power. Meanwhile, the restructuring should be welcomed by investors since it seems management is serious about it, and the stock now trades at a discount to many of its peers.
All told, there's a case for buying the stock, but it probably makes sense to wait for management to demonstrate a few quarters of progress in particular in the healthcare and consumer segments before buying in.
Jan 31, at AM.
Author Bio Industrial sector focus. I write about electrical equipment, transportation, and multi-industry industrial stocks. Engineer, investment manager and property developer. I'm a firm believer that there is something noble about the industrial sector. Blue collar workers physically making a better world. Follow me on Twitter to receive quick and thorough analysis of your favorite stocks. Follow LeeSamaha. Image source: Getty Images.After all, the company now sports a near 2.
However, I think the stock is still worth avoiding. Let's take a look at why, as well as what was discussed at the event. In plain English, this means 3M's solutions aren't commodity-type offerings and therefore tend to have some pricing power. So, 3M should be able to grow revenue through increasing price without suffering significant drop-offs in volume while maintaining strong margin.
Indeed, 3M has demonstrated an ability to command margin, thanks to offering differentiated products. As you can see below, 3M's gross margin has been consistently superior to other leading industrial companies, including its best comparable multi-industrial peer, Illinois Tool Works. But here's the thing: There appear to be some cracks forming in 3M's business model. There's nothing wrong in this per se, but it needs to be backed up by demonstrable improvement in pricing power.
Unfortunately, 3M appears to be losing ground on this issue. For example, the chart below shows two things that should concern investors.
First, although total company sales growth was good init was largely due to volume improvements -- 3M particularly benefited from a cyclical improvement in its electronics and energy segment inrather than any improvement in pricing.
Second, the chart seems to show an inverse relationship between pricing and volume. This is the sort of relationship you might expect from commodity-type products that don't possess much pricing power -- as prices rise, volume falls.
Moreover, 3M's less cyclical segments healthcare and consumer are struggling to grow in line with management's mid-term guidance.
The 1 Reason to Avoid 3M Company's Stock
The consumer segment has only grown in line with guidance in one of the last eight quarters, and the healthcare segment has only done this three times in the same period. The cracks are showing. The issue of pricing came to the forefront at EPG, and Roman's response wasn't particularly convincing. In a nutshell, he said that in the first half of3M was slow moving "into a higher growth marketplace," but in the second half, management adjusted and set the company up for stronger pricing.
He cited the stronger pricing performance in the first quarter of as a sign of improvement. Roman's argument and Gangestad's forecast are open to question for two main reasons. First, the first-quarter organic growth of 0. In fact, it's lower than any figure produced by 3M in -- recall that U.
Second, going back to 3M's second-quarter earnings callGangestad claimed 3M was making "selected price adjustments," but he expected "more normal price growth for 3M" in the second half of It didn't happen. The reality is 3M didn't have anything like "normal" price growth in It could be argued that the strong volume growth in the second quarter was achieved because 3M didn't take aggressive enough action on pricing -- a sign that 3M doesn't have significant pricing power.
As you can see below, 3M stock has long commanded a premium compared to peers in its sector -- a large part of the reason why is its reputation for having products with pricing power.
Frankly, it's too early to tell just yet, but the warning signs are there. Management, for the second time in two years, is promising a better pricing environment in the second half of the year.
If 3M can't get back to demonstrating that it has pricing power -- a key part of its business model -- then investors have reason to question whether the stock continues to deserve its premium valuation rating compared to its sector.
Jun 6, at AM. Author Bio Industrial sector focus. I write about electrical equipment, transportation, and multi-industry industrial stocks. Engineer, investment manager and property developer.Ask questions, get answers, and help others with their bonding and assembling challenges.
You are challenged to make products and processes better. We have the science to help. We can borrow from one technology, such as one of our vast tape formulations, combine it with cross-linking chemistry and create a fast-tack, strong holding water-based adhesive.
We infused viscoelastic foam with our unique adhesives to create an amazingly strong, easy-to-use bonding tape. We took ordinary elastomeric materials and developed a proprietary high-strength matrix so you can create more impact-resistant products. These are just a few of the ways we connect our technology to your ideas. So bring us your requirements — for strength, fit, flex, impact, aesthetics, noise, weight, speed, assembly and more — and we'll bring 3M's science to help you meet your challenges — large and small.
Need help finding the right product for your project? Contact us if you need product, technical or application advice or want to collaborate with a 3M technical specialist, or give us a call at In parts of the world, getting access to fresh food presents significant obstacles.
In his travels throughout developing markets, Quang Truong witnessed how the lack of access to refrigeration hurts rural communities. Marketplace visits could be day-long commitments. Small rural farmers lost as much as 45 percent of their crop after harvest to the unrelenting heat. Without a means of efficient refrigeration, time and wasted resources impacted the very livelihood of families who could least afford it.
He also came into contact with traditional food preservation techniques like evaporation cooling. Home grown evaporative cooling units, often using breakable, heavy clay pots, have proved an effective and accessible way to keep produce cool in withering temperatures.
The cumbersome nature of these home grown designs, however has significantly limited their adoption. By bringing modern design techniques and fabrication technologies to evaporative cooling, Truong believed he could improve efficiency, and change lives. He founded Evaptainers, with a mandate to design low cost evaporation refrigeration units using 21st century materials that worked within the resource limitations of some of the world's harshest environments.But is it a buy right now or not?
It's been a difficult year for 3M, with the company cutting its full-year sales and earnings guidance through the year. Indeed, a slew of industrial companies have been hurt by declining automotive production and a weak consumer electronics market this year, while the trade war has exaggerated slide.
Whether 3M's management should have foreseen some of this and not been so optimistic with guidance is a valid question, and there's little doubt that the issue has damaged investor confidence. But whichever way you look at it, 3M has lost the premium valuation it commanded at the start of the year -- here, measured in terms of price to free cash flow FCF.
The glass-half-full case sees 3M as a potential value play. Data source: Company presentations, analyst estimates from www. Meanwhile, CEO Mike Roman is taking action to revitalize the company, which now operates out of four segments instead of five. In other words, 3M's management is addressing the underperformance of healthcare.
While the cyclical weakness in the other two segments -- mainly coming from China, automotive, and consumer electronics -- could turn in the future. Data source: Company presentations. All told, the bullish case sees 3M as a value play in turnaround mode that will pay you a 3.
Putting these issues into context, 3M can be forgiven for near-term weakness, but the potential PFAS liability is an obvious worry. Frankly, investors probably need more commitment from management regarding portfolio restructuring and clarity on PFAS before feeling fully confident in buying the stock.
Moreover, management can't keep blaming the economy when its less-cyclical businesses are underperforming its own expectations. That said, there's certainly potential for these issues to be dealt with through Moreover, 3M's valuation and the potential for a turnaround are good reasons to keep an eye on the stock for now, rather than put it on the buy list. Dec 18, at AM.CRAZY RETURNS IN THIS STOCK: Why 3M (mmm) is a good dividend and value stock to buy right now
Author Bio Industrial sector focus. I write about electrical equipment, transportation, and multi-industry industrial stocks. Engineer, investment manager and property developer. I'm a firm believer that there is something noble about the industrial sector.