Is 3M (MMM) Finally a Buy?

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Industrial Stock Searches in the Last Month Rank Ticker Name Searches #1 [MMM]( 3M Company 25 #2 [AAL]( American Airlines Gp 23 #3 [DY]( Dycom Industries 22 #4 [UPS]( United Parcel Service 15 #5 [CAT]( Caterpillar Inc 14 #ad [Deadline to collect dividend: Friday, August 16th]( Brought to you by [Stansberry Research]( [Hedge Fund Legend Calls Exact Day of Stock Crash]( [Stansberry Research - Hedge Fund Legend Calls Exact Day of Stock Crash]( Money managers might tell you it’s impossible to perfectly time a market crash. But one former hedge fund manager CNBC calls “The Prophet” is stepping forward to prove them wrong. Whitney Tilson has accurately predicted nearly every major market crash of the 21st century – often to the exact day. With this eerie track record, you can see why Tilson successfully tripled his clients’ money during his time on Wall Street. 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These are just two of the more than 60,000 products across diverse industries, such as office supplies, healthcare, automotive, and electronics, which have resulted in over 100,000 patents. Operating in more than 70 countries, 3M leverages its scientific expertise to create solutions for everyday challenges. The company's product portfolio ranges from respirators and bandages to touchscreen displays and automotive films. 3M segments its business into the following areas: - Safety and Industrial (49% of total revenues) - Includes personal safety equipment, industrial adhesives, and abrasives - Transportation and Electronics (34% of total revenues) - Encompasses automotive products, electronic components, and commercial graphics - Consumer (17% of total revenues) - Features office supplies, home improvement products, and consumer health care items Despite its innovative heritage, 3M has faced significant challenges over the past decade. The company has struggled with sluggish organic growth, falling from over 1,000 new product introductions annually to fewer than 150 in 2024. This decline, coupled with mounting legal liabilities related to PFAS chemicals and combat earplugs, has weighed heavily on 3M's financial performance and stock price. 3M's CEO, William Brown, emphasized three key priorities moving forward: driving sustained organic revenue growth, increasing operational performance, and effectively deploying capital. In its recent Q2 2024 earnings report, 3M delivered strong results, with adjusted earnings per share of $1.93, up 39% year over year. The company's focus on operational execution and productivity improvements contributed to an adjusted operating margin of 21.6%, an increase of 4.4 percentage points from the previous year. While this marked a huge improvement for the company, its turnaround plan has much further to go. Financials [Financials] Source: Stock Analysis 3M’s sales are essentially the same as they were in 2018. However, gross profits are down 9.4%, operating income dropped 28.6%, and net income plunged 82.3%. The legal settlements weighed heavily on these last two years, costing the company $16.4 billion, hitting the income sheet after operating profits are calculated. Free cash flow doesn’t yet show the impact, as the bulk of the settlement will be paid out over 13 years. Thankfully, the company carries just $13.8 billion in debt with $10.3 billion in cash on its balance sheet. Operating cash flow runs $5.7 billion annually, with free cash flow at $4.3 billion. That leaves plenty to cover the dividend, some share buybacks, and pay out legal expenses. Valuation [Valuation] Source: Seeking Alpha For all its problems, 3M’s stock isn’t cheap relative to its peers. Trading at 18.2x forward earnings, that’s in line with American Airlines (AAL) and United Postal Service (UPS), while a bit higher than Caterpillar (CAT). At 12.1x operating cash flow, 3M is similar to Caterpillar and UPS, though cheaper than Dycom Industries (DY). Growth [growth] Source: Seeking Alpha Stretched out over five years, 3M has the worst average annual revenue growth. Its dwindling profitability is only matched by UPS, which recently took a huge cost hit when it renegotiated its union contracts. And 3M’s forward outlook isn’t all that pretty. Profitability [Profit] Source: Seeking Alpha 3M may boast the highest gross margins. And even its EBIT margin is solid. If we back out the legal costs, 3M’s net income margin would land at 15.8%, which is higher than all in this list save Caterpillar. 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There’s no mention of AI or rejuvenating the culture of innovation. Sure, the stock is cheap. But so are other industrial companies. And at least the others have a story to tell. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D625400?utm_medium=ic-nl&utm_source=121319 ) News & Insights Just Spilled - [Why Changes at Starbucks (SBUX) Could Spell Big Profits]( - [Beyond Traditional Investments: Embrace Diversity]( - [The $173 Billion Pill: Eli Lilly’s (LLY) Weight Loss Revolution]( - [This Stock Climbed While Markets Fell]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= https%3A%2F%2Finvestingchannel.com%2F%3Fp%3D625400?utm_medium=ic-nl&utm_source=121319 ) [We want to hear from you. 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