Here's Why You Should Hold 3M (MMM) in Your Portfolio Now
3M Company MMM is benefiting from cost-control initiatives and pricing actions. The company has been committed to handsomely rewarding its shareholders through dividends and share buybacks. However, softness in disposable respirator demand, reduced consumer electronics demand and raw material and logistics cost inflation are a drag on its operations.
Let’s delve deeper to unearth the factors that are aiding this Zacks Rank #3 (Hold) company.
Pricing Actions & Cost-Control Measures: 3M’s pricing actions (to mitigate the adverse impact of raw material and logistics cost inflation), restructuring savings and spending discipline are expected to support its margins. The company has undertaken organizational restructuring, affecting approximately 6,000 positions globally, to reduce costs and improve margins and cash flow in the long term. 3M expects these actions to yield annual pre-tax savings of $700 million-$900 million, approximately half of which is expected to be realized in 2023.
3M Company Price and Consensus
3M Company price-consensus-chart | 3M Company Quote
Improving Supply Chains: With improving supply chains, 3M anticipates improvements in organic growth, operating margins, earnings and cash flow in due course of the year. Strength in the automotive aftermarket business bodes well for the Safety and Industrial unit. Growth in the auto OEM business should aid the Transportation and Electronics segment. Organic sales growth in the medical solutions and oral care business is benefiting the Healthcare segment, while muted growth in home, health and auto care should aid the Consumer unit.
Rewards to Shareholders: 3M’s shareholder-friendly policies spark optimism. In the first half of 2023, MMM rewarded its shareholders with $1,655 million in dividend payments and $29 million in buybacks. In February 2023, MMM hiked its quarterly dividend by 0.7% to $1.50 per share. Strong free cash flow generation supports its shareholder-friendly measures. Adjusted free cash flow at the end of the second quarter was $2409 million, up 35.3% year over year.
Key Picks
Some better-ranked stocks from the Diversified Operations industry:
Griffon Corporation GFF currently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 30.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
Griffon has an estimated earnings growth rate of 7.6% for the current fiscal year. The stock has gained 10.2% in the year-to-date period.
Markel Group Inc. MKL is also a Zacks Rank #2 player. The company delivered a trailing four-quarter earnings surprise of 10%, on average.
Markel Group has an estimated earnings growth rate of 26% for the current year. The stock has gained 11.2% so far this year.
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3M Company (MMM) : Free Stock Analysis Report
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