The multinational industrial company is at risk for a big decline. One of the big consequences of the fiscal cliff debate was a freezing of much economic activity during the fourth quarter. Such indecisiveness by CEOs on purchases and hiring will likely negatively impact earnings at 3M (NYSE:MMM). A poor report would not be welcome news for investors who have bid up 3M shares. Analysts expect 3M to grow profits by less than 10% in 2013. At current prices, shares trade for 14 times 2013 earnings.
On some level you could argue that a higher valuation is justified given the dividends paid by the company, but let’s not make this too complicated. Equity investors generally pay a premium for growth. If that growth isn’t there, the valuation at some point will deteriorate.
Look for this week’s earnings to disappoint and shares to step back from current highs.
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