3M Company (NYSE:MMM) is scheduled to report its Q3 2021 results on Tuesday, October 26. We expect 3M to likely post revenue and earnings above the street expectations, driven by a rebound in the overall economic activity, as global Covid-19 vaccination rates continue to rise. This will bode well for 3M’s automotive aftermarket business, while we expect continued robust demand outlook for its home improvement and personal safety products. We expect the company to navigate well based on these trends over the latest quarter.
Furthermore, our forecast indicates that 3M’s valuation is around $205 per share, which is 13% above the current market price, implying the stock has some more room for growth. Our interactive dashboard analysis on 3M’s Pre-Earnings has additional details.
(1) Revenues expected to be above the consensus estimates
Trefis estimates 3M’s Q3 2021 revenues to be around $8.75 billion, slightly above the $8.67 billion consensus estimate. The gradual opening up of economies and vaccination programs in the U.S. has resulted in a pickup in industrial demand, and this should bode well for 3M’s overall revenue growth in the near term. Looking back at Q2 2021, revenues grew 25% y-o-y to $8.95 billion, with gains in automotive aftermarket as well as home improvement businesses, a trend expected to continue in the near term. Our dashboard on 3M’s Revenues offers more details on the company’s segments.
2) EPS also likely to be above the consensus estimates
3M’s Q3 2021 adjusted earnings per share (EPS) is expected to be $2.28 per Trefis analysis, slightly above the consensus estimate of $2.20. 3M’s adjusted net income of $1.5 billion in Q2 2021 reflected a 45% rise from its $1.0 billion figure in the prior-year quarter. This can be attributed to higher revenues and improved margins, owing to lower operating expenses. However, 3M will likely see margin pressure in Q3, owing to the rising raw materials costs. That said, for the full-year 2021, we expect the adjusted EPS to be higher at $9.96 compared to $8.74 in 2020.
(3) Stock price estimate above the current market price
Going by our 3M’s Valuation, with an adjusted EPS estimate of around $9.96 and a P/E multiple of around 20.6x in 2021, this translates into a price of $205, which is 12% above the current market price of around $182. The P/E multiple of 20.6x for 3M is largely in-line with the levels seen over the recent years. That said, if the company reports upbeat results, with recovery in sales faster than our estimates, and the guidance for the full-year is revised upward, it is likely that the P/E multiple will be revised upward, resulting in even higher levels for MMM stock.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Earnings for the full year
While MMM stock has more room for growth, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for 3M vs. Ingevity.
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