3m stock going down why?

by Dr. Felipe Bruen Published 3 years ago Updated 2 years ago

Full Answer

What happened to 3M stock in February?

The stock of 3M ( MMM 0.19% ) tumbled 10.5% in the month of February, according to data provided by S&P Global Market Intelligence. With shares of the industrial conglomerate losing another 3% so far in March, 3M stock is now barely 4% away from its 52-week lows as of noon Tuesday.

Is 3M’s stock too attractive to ignore?

3M Company’s stock price has declined ~16% since the beginning of this year. While there are some near-term headwinds, the stock has become too attractive to ignore trading at ~14.5x forward P/E with a ~3.96% dividend yield.

Is 3m a good buy at current levels?

Why did 3M underperform this year?

There are several reasons behind 3M Company's underperformance this year. The biggest one was the concern about the impact of N95 mask sales declining. Prior to the pandemic, the company's disposable respirator business had sales of ~$600 mn. This increased to ~$1.4 bn in FY2020 and added another ~$100 mn to reach ~$1.5 bn in FY2021.

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Why is 3M stock doing so poorly?

3M Company's automotive and electronics business is getting impacted by chip shortages while the whole company is facing headwinds from rising freight and raw material costs as well as supply chain disruptions.

Why did MMM drop?

The verdict was 3M's largest loss yet in a trial related to the earplugs. The market dumped the stock as it feared how high 3M's litigation risks could eventually be given the roughly 300,000 lawsuits against it involving just the earplugs.

Is 3M stock a good buy now?

3M currently trades for $137.65 a share. The average 12 month price target of the 15 analysts rating the company is $165.14. The average price target of the 5 analysts that rated the company following the most recent quarterly report is $152.00. I should add that only one analyst rates the stock as a buy.

Will 3M stock go up?

Stock Price Forecast The 17 analysts offering 12-month price forecasts for 3M Co have a median target of 145.00, with a high estimate of 194.00 and a low estimate of 118.00. The median estimate represents a +13.65% increase from the last price of 127.59.

Is 3M a buy sell or hold?

3M has received a consensus rating of Hold. The company's average rating score is 1.79, and is based on 1 buy rating, 9 hold ratings, and 4 sell ratings.

Is 3M a good stock to buy 2021?

The stock is currently trading 28.9% below its 52-week high of $206.81, which it hit on June 7, 2021. The company's revenue has grown at the disappointing rate of 3% over the past three years, and its EBITDA has grown only at a 1.4% CAGR over this period.

Is 3M a blue chip?

3M also offers a variety of processing aids to compliment its edging an surfacing portfolio....3M™ Blue Chip Optical Lens Processing Protector 35mm, 1647, 2000/ROLL.Attribute NameValueSurfacingYesTape ColorBlue22 more rows

Is 3M a stable company?

3M is a stable, possibly undervalued company, that has a 3.6% dividend yield, which puts it in the top 25% of dividend paying companies in the market. The company has limited growth opportunities, but has strong and consistent fundamentals, which are not likely to put the dividend at risk.

Is MMM a good dividend stock?

In terms of dividend growth, the company's current annualized dividend of $5.96 is up 0.7% from last year. Over the last 5 years, 3M has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.72%.

Sales Details

In the quarter under review, 3M’s net sales were $8,950 million, reflecting growth of 24.7% from the year-ago quarter. The company’s net sales also surpassed the Zacks Consensus Estimate of $8,539 million. Results benefited from 21.4% year-over-year increase in organic sales and 4% gain from movements in foreign currencies.

Margin Profile

In the quarter under review, 3M’s cost of sales increased 24% year over year to $4,719 million. It represented 52.7% of net sales compared with 53% in the year-ago quarter. Selling, general and administrative expenses grew 9.5% to $1,746 million. It represented 19.5% of net sales versus 22.2% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the second quarter, 3M had cash and cash equivalents of $4,695 million, reflecting increase from $4,636 million at the end of the last reported quarter.

Outlook

For 2021, 3M updated its projections. Adjusted earnings are expected to be $9.70-$10.10 per share. Sales are predicted to increase 7-10% year over year, with organic sales growth of 6-9%. The company also anticipates cash flow of $7.1-$7.7 billion from operating activities and capital expenditure of $1.8-$2.0 billion.

What is 3M's EPS for 2021?

This can be attributed to higher revenues and improved margins, driven by a y-o-y decline in both SG&A and R&D expenses. However, 3M will likely see margin pressure in Q1, owing to the restructuring initiatives, including certain divestitures, the company has undertaken in the second half of 2020. For the full-year 2021, we expect the adjusted EPS to be $9.61 compared to $8.74 in 2020.

Did 3M cover up design defects?

Last week, 3M won a court case in which it was accused of covering up design defects in earplugs used by the military. While the company continues to maintain that the earplugs are safe and effective, there are over 200,000 claims against the company, with another trial starting today.

3M stock sinks toward longest losing streak in nearly 4 years

Shares of 3M Co. fell 0.8% in midday trading Wednesday, to put them in danger of suffering the longest losing streak in nearly four years, and on track for a 21-month closing low.

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Introduction

On January 30th, I published an article titled "How far could 3M fall?". Since that time, I've published over 20 articles examining how far other large-cap stocks in the industrial sector and the service sector could fall if there was a bear market or a recession.

The Price I'll Start Buying

As part of my analysis in January, I noted that the number of significant sell-offs 3M stock had experienced over the past five decades really surprised me. In fact, 3M has had fewer deep sell-offs than any of the 26 stocks I've covered in the "How far could they fall?" series of articles this year.

Current Owners

If I was a current owner of 3M and didn't need access to the funds invested in the stock for the next five years, I would probably hold on in order to see if this is a premature prediction of a market downturn. I've seen this a lot with cyclical stocks.

Potential Buyers

I'm in this category, and since I think there are two equally likely downside scenarios - one that includes a bear market without a recession and one that includes a bear market with a recession - I'm going to have two equally weighted entry points for the stock.

Investors Who Rotated Into JNJ

I think if I were a JNJ holder, I would wait to get closer to that 30% spread between the two stocks I originally thought could happen, and I probably wouldn't even get interested in rotating back into 3M until I saw a 20% spread open up between the two stocks.

Conclusion

It's hard to write bearish articles on quality companies when they are trading at all-time highs like 3M was in January, but the fact is sometimes quality businesses get overvalued by the market and it's a good idea to sell and rotate into more defensive positions, especially if we appear to be entering the later stages of the business cycle.

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