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3M Company MMM presently seems a smart investment option in the conglomerate space. The company’s strong fundamentals and healthy growth opportunities justify its appeal. It presently carries a Zacks Rank #2 (Buy).
The company has a market capitalization of $101.1 billion and is based in St. Paul, MN. It belongs to the Zacks Diversified Operations industry — which is currently at the top 43% (with the rank of 108) of more than 250 Zacks industries.
In the past three months, the company’s shares have gained 3% as compared with the industry’s growth of 21.1% and the S&P 500’s rise of 8.6%.
Below we discussed why 3M is a worthy investment option.
Growth Tailwinds: 3M is well-positioned to reap benefits from a solid portfolio of products, focus on innovation and investments in growth opportunities. Also, its sound capital-allocation strategy and cash flow generation capabilities are its advantages. Its restructuring measures aimed at streamlining operations are anticipated to be boons.
Also, the company is benefiting from high demand in home improvement, personal safety, biopharma filtration, data center, general cleaning and semiconductor markets. It anticipates the demand for respirators to increase sales by 300 basis points in the fourth quarter of 2020.
The Zacks Consensus Estimate for the company’s revenues is pegged at $8.25 billion for the fourth quarter, representing year-over-year growth of 1.7%.
Buyouts/Divestments: Inorganic actions have been proving beneficial for 3M over time. In third-quarter 2020, its buyouts and divestments favorably impacted sales by 3% and positively impacted the top line by 2.4% in the second quarter.
Notably, the company’s last buyouts included Acelity Inc. and its KCI subsidiaries (in October 2019), and M*Modal’s technology business (February 2019). Among divested businesses were the advanced ballistic-protection business in January 2020 and the drug delivery business in May 2020. Also, the company divested the gas and flame detection business last August.
Shareholders’ Rewards: 3M believes in rewarding shareholders handsomely through share buybacks and dividend payments. It bought back shares worth $366 million and distributed dividends totaling $2,540 million to its shareholders in the first nine months of 2020. In the year-earlier period, its share buybacks and dividend payments were $1,243 million and $2,488 million, respectively.
It is worth mentioning here that 3M announced a hike of 3 cents per share in its quarterly dividend rate in February this year. A healthy cash flow position will help the company to reward shareholders. It is worth noting here that it suspended its buyback activities temporarily due to the pandemic.
Earnings Estimate Trend: 3M’s earnings estimates have been revised upward in the past 60 days, reflecting bullish sentiments for its prospects. Notably, the Zacks Consensus Estimate for the company’s earnings is pegged at $8.61 for 2020 and $9.42 for 2021, suggesting growth of 3.6% and 4.6% from the respective 60-day-ago figures. There were six positive revisions in estimates for each of the years.
3M Company Price and Consensus
3M Company price-consensus-chart | 3M Company Quote
In addition, the consensus estimate for the fourth quarter is pegged at $2.25, reflecting an increase of 1.4% from the 60-day-ago number. Notably, there have been four positive revisions and one negative in the past 60 days.
Other Key Picks
Three other top-ranked stocks in the industry are Danaher Corporation DHR, ITT Inc. ITT and Crane Co. CR. These companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 30 days, earnings estimates for these companies improved for the current year. Also, earnings surprise for the last four reported quarters, on average, was 17.00% for Danaher, 22.39% for ITT and 14.59% for Crane.
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