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3M Adds Rosenberger and Molex as Assembly Solution Partners

Zacks Equity Research

3M Company MMM recently added Rosenberger OSI and Molex as its assembly solution partners in its Expanded Beam Optical (EBO) Connector ecosystem. As noted by 3M, both the partners will work on manufacturing and selling expanded beam optical solutions based on the company’s Expanded Beam Optical Connector System.

Notably, 3M’s Expanded Beam Optical Connector is designed to cater to the requirements of the next-generation data center for the industry. Touted as cost-effective, the system has a single scalable mode and multimode interconnect system, making it ideal for data center applications.

This latest move marks the addition of 3M’s first assembly solution partners to join its ecosystem, which already incorporates inspection tool partners like Sumix and EXFO Inc EXFO. As a matter of fact, the partnership with Rosenberger and Molex will allow the company to develop and extend the leading technology facilitating next-generation data center optical connectivity.

Existing Business Scenario

3M intends to become more competent by strengthening its product portfolio. The company’s value model that comprises four priorities — Portfolio, Innovation, Transformation, and People and Culture — will help boost its margins. In sync with its Portfolio priority, the company acquired the technology business of M*Modal — a prominent healthcare technology provider of conversational AI-powered systems — in Feb 2019. This buyout has been strengthening the company's Health Information Systems business.

However, the company has been dealing with rising cost of sales over the last few quarters. In the first quarter and second quarter of 2019, the company's cost of sales escalated 1.7% and 2%, respectively, on a year-over-year basis. Inflation in the prices of raw materials had primarily resulted in the increase.

At present, 3M carries a Zacks Rank #3 (Hold). In the past month, the company has returned 6.9% compared with the industry’s 8.6% growth.

Key Picks

Some better-ranked stocks from the same space are Federal Signal Corporation FSS and United Technologies Corporation UTX. While Federal Signal sports a Zacks Rank #1 (Strong Buy), United Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average earnings beat 16.48%.

United Technologies outpaced earnings estimates in each of the preceding four quarters, the average being 13.19%.

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