3M Stock To Trade Higher Post Q3?

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Trefis
MMM: 3M Company logo
MMM
3M Company

3M Company (NYSE: MMM) is scheduled to report its Q3 2022 results on Tuesday, October 25. We expect the company to post revenue and earnings above the street expectations. The company should benefit from steady demand for its healthcare and consumer offerings. However, a continued fall in demand for respirators and a strengthening USD will likely weigh on the overall top and bottom-line expansion. We expect MMM stock to trend higher post its Q3 results. Furthermore, our forecast indicates that MMM stock has ample room for growth, as discussed below. Our interactive dashboard analysis of the 3M Earnings Preview has additional details.

(1) Revenues expected to be above the consensus estimates

  • Trefis estimates 3M’s Q3 2022 revenues to be around $8.9 billion, reflecting no growth compared to the prior year quarter, but above the $8.7 billion consensus estimate.
  • 3M should benefit from better price realization and a steady demand for its healthcare and consumer products.
  • However, lower demand for respirators, a rise in USD, continued supply chain disruptions, and slowing economic growth are likely to weigh on the overall revenue growth.
  • Looking back at Q2 2022, revenues were down 3% y-o-y to $8.7 billion, with a decline in all segments but Healthcare.
  • Our dashboard on 3M’s  Revenues offers more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • 3M’s Q3 2022 adjusted earnings per share (EPS) is expected to be $2.67 per Trefis analysis, compared to the consensus estimate of $2.61 and the $2.45 figure the company reported in the prior-year quarter.
  • 3M’s adjusted net income of $1.4 billion in Q2 2022 was down 13% y-o-y, primarily due to a 240 bps decline in the company’s EBITDA margins.
  • Inflationary headwinds, forex, and supply chain disruption likely weighed on the company’s net margin expansion in Q3.
  • For the full-year 2022, we expect the adjusted EPS to be higher at $10.50, compared to $10.12 in 2021.

(3) Stock price estimate above the current market price

  • We estimate 3M’s Valuation to be around $149 per share, which is about 31% above the current market price of $114.
  • At its current levels, 3M stock is trading at just 11x its expected EPS of $10.30 in 2022, compared to the last three-year average of 18x, implying that MMM stock has ample room for growth.
  • Furthermore, if the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in 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 looks like it has some more room for growth, it is helpful to see how 3M’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for 3M vs. AGCO.

With inflation rising and the Fed raising interest rates, among other factors, MMM stock has fallen 36% this year. Can it drop more? See how low 3M stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 MMM Return 3% -36% -36%
 S&P 500 Return 3% -23% 64%
 Trefis Multi-Strategy Portfolio 2% -25% 196%

[1] Month-to-date and year-to-date as of 10/18/2022
[2] Cumulative total returns since the end of 2016

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