Industrials Weekly Review: 3M, Caterpillar, Deere

During the past week, 3M (NYSE:MMM) announced that it has entered a definitive agreement to acquire Capital Safety. Meanwhile, Caterpillar (NYSE:CAT) continued to lay off workers amidst weak mining equipment demand, while Deere’s (NYSE:DE) stock benefited from the recent jump in crop prices. Below is a quick rundown on the most notable events in the last week related to these companies.

3M

On June 23, 3M announced that it will be acquiring Capital Safety from KKR & Co. for an enterprise value of $2.5 billion. ^[1] Capital Safety is a leading player in the safety equipment market.  The acquisition will help enhance 3M’s Safety and Graphics portfolio, which provides respiratory and hearing protection solutions, reflective materials for high-visibility apparel, protective clothing and eyewear. 3M expects the acquisition to dilute earnings by $0.04 in the first 12 months after the completion of the deal. However, excluding one-time expenses and adjustments, the acquisition will be $0.12 accretive to earnings over the same period. According to Moody’s, the acquisition will not have any impact on 3M’s ratings. ^[2]

3M’s stock declined 1.2% over the week through Friday. We currently have a price estimate of $151 for 3M. We estimate revenues of $32.1 billion for this year, compared to consensus estimates of $31.1 billion, and EPS of $8.02, compared to consensus estimates of $7.91.

Click here to see our complete analysis of Honeywell

Caterpillar

Ongoing softness in mined commodities has forced Caterpillar to lay off another 50 employees at its East Peoria facility, bringing the total up to 270. ^[3] Earlier this month, Caterpillar announced that it will idle 120 workers, and in January the company cut 100 jobs at the East Peoria facility.

According to the company’s retail statistics for the 3-month rolling period ended May, its Resource Industries segment’s retail sales declined 8% year-on-year. ^[4] However, it is pertinent to note that declines have moderated significantly, compared to the 46% decline witnessed a year ago. ^[5] It seems that the sales decline will likely bottom out soon.

Caterpillar’s stock declined 0.8% over the week through Friday. We currently have a price estimate of $85 for Caterpillar. For 2015, we estimate revenues of $50 billion, compared to a consensus estimate of $49.3 billion, and EPS of $5.00, compared to a consensus estimate of $4.98.

Click here to see our complete analysis of Caterpillar

Deere

Deere’s stock jumped 2.6% on Friday over reports of crop prices surging due to unfavorable growing conditions, which will impact supply. Wet conditions are discouraging farmers from planting corn and soybean, while seedling struggle to mature, threatening yields for these crops. The conditions will also delay wheat harvests.

Corn prices rose to a one-month high of $4.06 per bushel, Soybean price increased to a three month high of $10.02 per bushel and wheat rose to a five-month high at $5.66 per bushel. ^[6]

Deere’s stock gained 4.2% over the week through Friday. We currently have a price estimate of $92 for Deere. For the year 2015, we estimate EPS of $5.67, in line with consensus estimates.

Click here to see our complete analysis of Deere

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1. 3M to Acquire Capital Safety, June 23, 2015, 3M’s Press Release [↩]
2. Moody’s: Capital Safety to be acquired by 3M Company; ratings unaffected at this time, June 23, 2015, Moody’s Website [↩]
3. Caterpillar will lay off workers due to mining sector slump, June 22, 2015, Reuters [↩]
4. 2015 YTD Retail Statistics, Caterpillar’s Website [↩]
5. 2014 Retail Statistics, Caterpillar’s Website [↩]
6. Corn, soybean prices rise with water levels, June 26, 2015, USA Today [↩]