3M Co’s (MMM) Cost Pressures, F/X Prompt Analyst to Lower PT

By Carrie Williams

cost-pressures-fx-prompt-jefferies-to-lower-pt-on-3m-co-mmmIn a research note released to investors today, analyst Laurence Alexander from Jefferies reiterated a Buy rating on the industrial and specialty material company, 3M Co (NYSE: MMM), while decreasing the price target from $210 to $200. The new PT is an upside of 15.18% from the today’s open price of $173.64. The stock is currently trading above its 50-day SMA of $171.78 and moving closer to its 52-week high of $182.27. Laurence Alexander‘s past ratings performance positioned him as a top 25 analyst on TipRanks, with an average return of 13.6% per rating and a 68% success rate.

Despite the positives like good dividend yields and solid franchise with top quarterly margins and returns through a cycle, the company has been slowly ebbed out from favorite list by investors. This is due to the general weakness in energy and electronics businesses, large exposure to consumer markets, as well as minimal upside from Trump’s repatriation proposal.

The firm also aligned with the current investor sentiments and lowered the 2017E by $0.10 to $8.60, and 2018E by $0.10 to $9.60, to reflect potential F/X headwinds. Alexander believes that in order to deliver $0.65-$0.90 of incremental EPS, in-line with 3M’s 5-year plan, the company would need to find the incremental EPS from lower taxes, more aggressive cost-cutting, and buybacks.

Alexander noted that the Global LEIs would likely lag the post-election sentiment shift by 2-3 months and the inflation picking up would likely provide tailwinds for pricing in 2018-2019. However, the 2017 outlook is anticipated to be fraught due to concerns on cost pressures and F/X, the commentary on customer behavior into yearend, and emerging market industrial trends. Alexander expected the focus to be shifted by 2H17 to 3M’s own pricing power and productivity and anticipates a better 2018-2019 due to possible favorable moves in the outlook for taxes, pension, and buybacks.

For now, based on the recent corporate insider activity of 99 insiders, the corporate insider sentiment is negative on the stock. Most recently, MMM’s Senior Vice President Julie L. Bushman sold 10,424 shares of the stock at an average price of $173.02, for a total value of $ 1,803,565 in a transaction done on November 4.

MMM currently has an overall analyst consensus rating of a Hold, based on data compiled by TipRanks.com. The average analyst price target on is $179.60, representing an upside of 3.52% from the last close.