Stock (Symbol) |
3M (MMM) |
Stock Price |
$170 |
Sector |
| Food & Necessities |
Data is as of |
| May 26, 2016 |
Expected to Report |
| Jul 21 – Jul 25 |
Company Description |
 3M Company operates in five business segments: Industrial, which serves a range of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket, electronics, appliance, paper and printing, packaging, food and beverage, and construction; Safety and Graphics, which serves a range of markets for the safety, security and productivity of people, facilities and systems; Electronics and Energy, which serves customers in electronics and energy markets, including solutions for electronic devices, telecommunications networks, electrical products, power generation and distribution, and infrastructure protection; Health Care – markets that include medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, and health information systems, and Consumer, which serves markets that include consumer retail, office retail, home improvement, building maintenance and other markets. Source: Thomson Financial |
Sharek’s Take |
 3M (MMM) is growing profits through a combination of cost cutting, stock buybacks and acquisitions. The multinational had 11% profit growth last qtr and cruised past the street estimate of 4% profit growth. Sales fell 2% but would have risen 1% without the effect of foreign exchange. F/X isn’t hurting the company as much as last qtr when it reduced sales growth from 0% to -6% and I feel this issue will dissipate in the coming qtrs. 3M’s big issue is global economic weakness, as these growth figures aren’t very good. Known for Post-It notes, Minnesota Mining and Manufacturing got its roots in selling sandpaper, and made its first sale in $1906 for $2 — four years after the company was founded. In 1925 Scotch tape was invented, Scotchgard was first sold in 1956, and Thinsulate thermal insulation was introduced in 1979. It 1980 the yellow Post-It note came to market. 3M touched an all time high recently, but the stock is richly priced. MMM’s P/E has risen from 18 to 21 just since last qtr, and although you’re getting excellent safety and stability with the stock, the estimated long-term growth rate is only 8%. From 2008 to 2012 the median P/E was 14. Still, this is a great buy-and-hold stock for the top 1% who aim for a vastly diversified conservative stock portfolio. MMM gets a top safety rating and pays a 3% dividend which it has increased every year since 1959. Management has a $10 billion stock buyback program in place, which is significant as the company’s market cap is $95 billion. |
One Year Chart |
 Although last qtr was solid, qtrly estimates still declined. Profit estimates for the next 4 qtrs are 2%, 6%, 18% and 3% with the 18% qtr being easy comparisons. I’m not that impressed with these numbers. And we can’t assume MMM will beat the street again because its only beaten in 2 of the last 4 qtrs. Annual estimates did rise with 2016’s going from $8.21 to $8.26 and that would equate to 9% profit growth for the year. Good, but when you’re P/E is 21 I would like to see double-digit growth. |
Fair Value |
 Last qrt MMM was selling right at my 2016 Fair Value. Now I think the stock is overvalued by 13%. The current stock market conditions are kind to conservative growth stocks. I feel the pendulum will soon swing the other way and money will come out of value stocks and go into growth stocks. |
Bottom Line |
 I feel 3M is solid conservative stock that families can hold for decades or perhaps even generations. The company has an estimated long-term growth rate of 8% a yea in addition to a 3% dividend that’s been increased every year since 1959. The issue I have is MMM has a P/E of 21 whereas the stock used to get a P/E in the mid-teens. MMM is on my radar for the Conservative Growth Portfolio., but I feel the stock would have to have a deep correction for me to invest. Wealthy investors with vastly diverse portfolios should continue to hold the stock for the long run. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
