Will 3M Report An Earnings Beat?

by Trefis Team
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Per Trefis estimations, 3M (NYSE: MMM) is expected to post earnings of around $9.14 compared to the consensus expectations of $9.05. The company is slated to release its Q4 and full-year 2019 results on January 28, 2020. We believe that 3M’s Revenues will be in line and Earnings will beat consensus. We expect 3M to report revenues of $32.4 billion (vs. consensus estimate of $32.1 billion), which would be 1.2% lower than the previous year. Earnings are likely to be around $9.14 (vs. consensus estimate of $9.05), up from $9.01 reported in 2018. We believe that negative revenue growth will overshadow stronger-than-expected earnings for FY 2019 – resulting in a slight reduction in 3M’s stock price once earnings are announced.  In fact, our forecast indicates that 3M’s valuation is $174 a share, which is slightly below the current price of around $179.

 

A] Revenue expected to be slightly below consensus

  • Total revenues has increased from $30.1 billion in 2016 to $32.8 billion in 2018.
  • Trefis estimates 3M’s revenues to decrease in 2019 due to to decline in 3M’s Safety & Industrial and Transportation & Electronics segment on account of weakness in certain end markets (China, automotive and electronics) and channel inventory adjustments.

A separate interactive dashboard for 3M provides an in-depth view of 3M’s revenue trend and segment-wise revenue performance, along with forecast for 2019.

 

B] EPS To Be Higher Than Consensus

  • 3M’s 2019 earnings per share (EPS) is expected to be $9.14 per Trefis analysis, higher than the consensus estimate of $9.05 per share.
  • In 2019, a fall in revenues as detailed above, coupled with a higher reduction in total expenses and lower share count, will cause the EPS to rise compared to the figure of $9.01 in the previous year.
  • As we forecast 3M’s Revenues to fall and Expenses to have a slower reduction in 2019 (1.2% vs. 1.1%), this will result in a slight reduction in 3M’s Net Income Margin figure from 16.2% in 2018 to 16.1% in 2019.

 

C] Stock Price Estimate Is lower Than The Market Price

  • A trailing P/E multiple of 19x looks appropriate for 3M’s stock, which is in a little lower with the current implied P/E multiple of 20x.
  • As per Trefis, 3M’s 2019 revenue will be in line with the market expectations while earnings are expected to be higher. This forecast works out to a fair value of $174 for 3M’s stock, which is slightly lower than its current market price.

Additionally, you can input your estimates for 3M’s key metrics in our interactive dashboard for 3M’s pre-earnings, and see how that will affect the company’s stock price.

 

See all Trefis Price Estimates and Download Trefis Data here

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