3M Stock To Trade Higher Post Q1?

-8.32%
Downside
102
Market
93.09
Trefis
MMM: 3M Company logo
MMM
3M Company

3M Company (NYSE: MMM) is scheduled to report its Q1 2023 results on Tuesday, April 25. We expect the company to post revenue and earnings slightly above the street expectations, benefiting from pricing actions. However, a continued fall in demand for respirators, divestitures, and the strengthening U.S. dollar will likely weigh on the overall top and bottom-line expansion. Also, our forecast indicates that MMM stock has more room for growth, as discussed below. Our interactive dashboard analysis of the 3M Earnings Preview has additional details.

(1) Lower respirator sales to weigh on overall sales growth

  • Trefis estimates 3M’s Q1 2023 revenues to be around $7.5 billion, reflecting a 15% y-o-y decline and aligning with the consensus estimate.
  • 3M should benefit from better price realization. However, lower demand for disposable respirators and a rise in USD will likely affect the overall revenue growth.
  • Looking back at Q4 2022, revenues were down 6% y-o-y to $8.1 billion, with a decline in all segments.
  • Our dashboard on 3M’s  Revenues offers details on the company’s segments.
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(2) EPS likely to be slightly above the consensus estimates

  • 3M’s Q1 2023 adjusted earnings per share (EPS) is expected to be $1.62 per Trefis analysis, compared to the consensus estimate of $1.58 and the $2.65 figure the company reported in the prior-year quarter.
  • 3M’s adjusted net income of $1.3 billion in Q4 2022 was down 11% y-o-y, primarily due to lower revenues and a 90 bps fall in the company’s operating margin.
  • For the full-year 2023, we expect the adjusted EPS to be lower at $8.66, compared to $10.10 in 2022.

(3) MMM stock has more room for growth

  • We estimate 3M’s Valuation to be around $121 per share, about 14% above the current market price of $106.
  • At its current levels, 3M stock is trading at 12x its expected EPS of $8.66 in 2023, compared to the last three-year average of 16x, implying that MMM stock has some room for growth.
  • If the company reports upbeat Q1 results and provides a 2023 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 12% 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 Apr 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 MMM Return 1% -12% -41%
 S&P 500 Return 1% 8% 86%
 Trefis Multi-Strategy Portfolio 3% 11% 249%

[1] Month-to-date and year-to-date as of 4/20/2023
[2] Cumulative total returns since the end of 2016

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