3M Co (NYSE:MMM), together with its subsidiaries, operates as a diversified technology firm with manufacturing operations across the world.
The 3M brand is one of the most recognized and trusted names around the world. Household products like Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard are market leaders in their individual categories.
The company remains focused on inventing new products, with its scientists and innovators enjoying a competitive advantage worldwide.
The company’s ability to convert high R&D spends into up-cycle market share gains and strong pricing powers determine its success.
Let us have a look at the reasons that make the stock a must buy at the moment.
3M Carries Solid Rank & VGM Scores
3M currently has a Zacks Rank #2 (Buy) and a Value Growth Momentum Score (VGM Score) of ‘B’. Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors.
Consequently, 3M appears to be a solid investment proposition at the moment.
Let’s Review 3M’s Estimate Revisions
Over the last three months, 3M’s current-quarter estimates increased from $2.25 to $2.54 per share while that for the current year increased from $8.64 to $8.93. With positive estimate revisions, investor sentiments clearly appear to be bullish on the stock.
MMM Year-to-Date Price Performance
Year to date, 3M’s shares have performed relatively better than the Zacks categorized Diversified Operations industry with an average return of 15.3% compared with an 1.4% gain for the latter.
Despite a challenging macroeconomic environment, 3M started 2017 on a positive note with strong first-quarter results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,323 million or $2.16 per share compared with $1,275 million or $2.10 per share in the year-earlier quarter.
The reported earnings exceeded the Zacks Consensus Estimate by 9 cents with an earnings surprise of 4.4%. Net sales during the quarter were $7,685 million, up from $7,409 million in the year-ago quarter. Sales surpassed the Zacks Consensus Estimate of $7,515 million with a positive surprise of 2.3%.
3M’s Guidance Moving Forward
3M raised its earlier guidance for 2017 on strong quarterly results and improved business outlook. The company anticipates 2017 GAAP earnings in the range of $8.70 to $9.05 per share, up from prior projection of $8.45–$8.80.
This represents year-over-year growth of 7–11%, up from 4–8% expected earlier. Organic local-currency sales are expected to be 2–5%, up from 1–3% projected earlier while free cash flow conversion rate is anticipated to be 95–105%.
We believe that such a bullish stance, along with its robust operating platform and an efficient management team will help in the execution of its strategic priorities and drive net asset value.
Other top stocks in the industry include Crane Co. (NYSE:CR), United Technologies Corporation (NYSE:UTX) and Federal Signal Corporation (NYSE:FSS), each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Crane has a long-term earnings growth expectation of 10.1%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 8.4%.
United Technologies has a long-term earnings growth expectation of 8.5%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 5.4%.
Federal Signal topped estimates twice in the trailing four quarters with an average positive earnings surprise of 3.1%.
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