WF vs. BEN: Which Stock Should Value Investors Buy Now?
3M Company MMM recently announced the sale of substantial part of its Communication Markets Division to Corning Incorporated. Notably, Corning is a premier manufacturer of glass, ceramics and related materials for industrial and scientific applications. The transaction worth $870 million is likely to generate a full-year 2018 earnings benefit of 40-45 cents per share to 3M.
The Communication Markets Division incorporates the company’s optical and copper passive connectivity solutions such as xDSL, FTTx and structured cabling solutions. The sale of the remaining telecommunications system integration services business, which remains pending, is likely to be completed later in 2018 for about $30 million.
Existing Business Scenario
Being one of the most recognized and trusted brand globally, 3M remains focused on inventing new products with its scientists and innovators. This, in turn, gives the company a worldwide competitive advantage over its peers. Also, 3M is investing heavily to bolster its competitive edge in the future. Meanwhile, the company’s portfolio restructuring efforts by divesting assets that no longer fit in its strategy are commendable. It continues to invest in other lucrative markets as well. In a year’s time, shares of this Zacks Rank #3 (Hold) company have lost 2.2%, outperforming the industry’s decline of 14.4%.
3M has also initiated some prudent steps to strengthen and focus on its core portfolio of businesses. Since 2012, the company has streamlined its businesses to a large extent, thereby improving customer relevance, productivity and speed through a leaner operating structure. At the same time, it has maintained a steady investment in R&D to develop innovative products.
Portfolio management, investment in innovation and business transformation are the three key levers on which the company intends to focus moving forward. Moreover, 3M’s global footprint, diversified product portfolio and ability to penetrate in different markets have been its forte.
However, 3M’s growth objectives are largely dependent on timing and market acceptances of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to market at acceptable price points.
Stocks to Consider
Some better-ranked stocks from the same space are United Technologies Corporation UTX, Federal Signal Corporation FSS and Raven Industries, Inc. RAVN. Each of the stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
United Technologies surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 6.8%.
Federal Signal exceeded estimates in the trailing four quarters, with an average positive earnings surprise of 16.1%.
Raven outpaced estimates twice in the preceding four quarters, with an average earnings surprise of 9.8%.
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