From cleaning supplies to adhesives and beyond, 3M (MMM) is a big deal that most people come in contact with almost every day. Its stock, however, is a little less palatable.
The company held largely flat in premarket trading on Tuesday, but by Tuesday midday, the company was down over three percent. This was despite a winning earnings report that should have lit a fire under investors.
I’m shifting to neutral on 3M; the picture overall is so mixed that it’s hard to tell which direction 3M will ultimately go. There’s almost equal potential here for the bull case to work out as well as the bear case will.
3M’s last 12 months in trading featured mainly plateaus with occasional drops leading into one big drop that lasted most of 2022’s first quarter. So far, the company has lost over 25% of its value since this time last year.
The latest news, meanwhile, should have been better for 3M overall. The company’s earnings report revealed $2.65 per share in adjusted earnings. Meanwhile, the consensus at Zacks called for just $2.33 per share.
Revenue proved a similar beat; the company brought in $8.83 billion against a Zacks consensus that called for $8.74 billion.
Wall Street’s Take
Turning to Wall Street, 3M has a Moderate Sell consensus rating. That’s based on eight Holds and five Sells assigned in the past three months. The average 3M price target of $158.62 implies 10.5% upside potential.
Analyst price targets range from a low of $118 per share to a high of $182 per share.
Pluses and Minuses in 3M Investor Sentiment
Investor sentiment will prove to have its own ups and downs for 3M.
First, we have the TipRanks 13-F Tracker and its take on things. For the fourth quarter in a row, hedge funds augmented their positions in 3M, if only slightly. After a sharp drop-off between December 2020 and March 2021, hedge funds have added to their positions ever since.
Insider trading at 3M is a bit tougher to ascertain. There hasn’t been a purchase or a sale since January. The last 12 months were brisker, however.
Buying transactions led selling transactions 36 to 25 over the last 12 months. However, after a brisk month of trading in January—which featured 13 buying transactions and 12 selling transactions—insider trading effectively stopped at 3M.
Then there’s the equally-mixed picture of retail investors. Retail investors who hold portfolios on TipRanks bought extensively in the past month but also reduced their positions more recently. In the last 30 days, the amount of TipRanks portfolios holding 3M was up 13.3%. However, in the last seven days, this figure dropped 0.4%.
Finally, there’s 3M’s dividend history. 3M’s dividend has behaved about how a dividend should as far as income investors go. It’s been paying out steadily and even increasing regularly for over six decades.
3M hiked its dividend going into the pandemic and hiked it in 2021 as well. Another raise arrived in February 2022. None of the increases have been particularly large, however.
Sticky Circumstances for 3M
3M proved a darling of the pandemic thanks to its hand in making breathing masks, a necessity throughout the early days of 2020’s pandemic response. If you wanted to leave the house back then, you were doing so in some kind of face mask.
Over time, however, that started to decline to the point where only a handful of places—mostly medical—require such today.
That, naturally, put a crimp into 3M’s profits. With most people no longer needing face masks to be seen in public, the demand for the same would drop accordingly. However, this time around, 3M could effectively manage those losses with a series of measures.
Some of those measures worked to address issues of supply chain constraints, which proved a problem for 3M.
MMM has also been working to augment its product line and hopefully further make up for the lost mask sales. Its recent move to purchase LeanTec technology assets will give it an edge in automotive care.
More specifically, it should improve operations in body shops, which, given the state of the used car market these days, should get a boost from consumers holding on to current cars longer.
Better yet, 3M is also looking to take advantage of the ballooning e-commerce market. Its new Scotch Cushion Lock represents “a paper alternative to plastic bubble wrap.” While nothing will ever truly replace bubble wrap—just ask everyone who loves to pop the bubbles—even taking a little of that market for its own will be a huge step forward.
Concluding Views
Ultimately, 3M puts up a solidly mixed bag for potential investors. There are new products in the pipeline that may be successful or may not be. 3M is taking steps to address current issues as well as potential shortfalls from formerly popular product lines that will be less popular, going forward.
3M is trading closer to its average price target than any other figure, so there’s some upside potential here, but not all that much. Hedge funds are hesitantly making their way back in, but insiders are holding onto current shares with both hands. They’re also not buying, which is somewhat unsettling.
I’m staying neutral on 3M because there’s almost equal potential for this stock to fall as it is to rise. Those of more adventurous taste may want to take the chance that Scotch Cushion Lock, LeanTec, and the others will produce solid outcomes. The more cautious, meanwhile, will likely hold their position instead.
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