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Here's Why It is Appropriate to Retain 3M Stock Right Now
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3M Company (MMM - Free Report) has been witnessing solid momentum in the Transportation and Electronics segment, driven by strength in electronics, automotive and aerospace, commercial branding and transportation end markets. Continued channel inventory normalization, supported by strong growth in electronics demand, is proving beneficial for the segment.
Solid momentum in the automotive electrification market and an increase in auto OEM (original equipment manufacturer) build rates are expected to augur well for the segment in the quarters ahead. The segment’s adjusted organic revenues grew 3.3% year over year in the second quarter of 2024.
The company intends to strengthen and expand its businesses through acquisitions. For instance, in April 2022, it acquired the technology assets of LeanTec. This strengthened its capability to deliver a more connected, digital body shop solution via its RepairStack Performance Solutions. Also, the company acquired M*Modal’s technology business in February 2019. The buyout expanded its capabilities in the Health Information Systems business. In the second quarter, acquisitions boosted net revenues by 1.3%.
3M remains committed to increasing shareholders’ value through dividend payments and share repurchases. For instance, in the first six months of 2024, it paid dividends worth $1.2 billion and repurchased shares for $421 million. At the end of the second quarter, the company had $3.8 billion remaining under the share repurchase program. Also, in February 2024, it hiked its quarterly dividend by 1%.
MMM’s Price Performance
Image Source: Zacks Investment Research
In the past six months, shares of this Zacks Rank #3 (Hold) company have risen 31.8% against the industry’s 4.5% decline.
However, weakness in the consumer retail end markets, owing to a decrease in consumer discretionary spending, remains a concern. This is reflected in the Consumer segment’s revenues, which declined 2.4% in the second quarter. There was a particular weakness in packaging and expression as well as home and auto care businesses. The company expects consumer retail discretionary spending on hardline goods to remain muted for the rest of the year, which is likely to hurt its overall performance.
High debt levels have also been concerning. An elevated debt level raises financial obligations and is likely to drain profitability. 3M exited the second quarter with a long-term debt of $11.8 billion. Also, interest expenses in the second quarter remained high at $322 million, up 123.6% on a year-over-year basis.
Federal Signal delivered a trailing four-quarter average earnings surprise of 12.3%. In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 5.2%.
Vector Group Ltd. (VGR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 15.4%.
In the past 60 days, the Zacks Consensus Estimate for VGR’s 2024 earnings has increased 5.2%.
Parker-Hannifin Corporation (PH - Free Report) currently carries a Zacks Rank of 2. PH delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the consensus estimate for Parker-Hannifin’s fiscal 2025 earnings has increased 1.1%.
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Here's Why It is Appropriate to Retain 3M Stock Right Now
3M Company (MMM - Free Report) has been witnessing solid momentum in the Transportation and Electronics segment, driven by strength in electronics, automotive and aerospace, commercial branding and transportation end markets. Continued channel inventory normalization, supported by strong growth in electronics demand, is proving beneficial for the segment.
Solid momentum in the automotive electrification market and an increase in auto OEM (original equipment manufacturer) build rates are expected to augur well for the segment in the quarters ahead. The segment’s adjusted organic revenues grew 3.3% year over year in the second quarter of 2024.
The company intends to strengthen and expand its businesses through acquisitions. For instance, in April 2022, it acquired the technology assets of LeanTec. This strengthened its capability to deliver a more connected, digital body shop solution via its RepairStack Performance Solutions. Also, the company acquired M*Modal’s technology business in February 2019. The buyout expanded its capabilities in the Health Information Systems business. In the second quarter, acquisitions boosted net revenues by 1.3%.
3M remains committed to increasing shareholders’ value through dividend payments and share repurchases. For instance, in the first six months of 2024, it paid dividends worth $1.2 billion and repurchased shares for $421 million. At the end of the second quarter, the company had $3.8 billion remaining under the share repurchase program. Also, in February 2024, it hiked its quarterly dividend by 1%.
MMM’s Price Performance
Image Source: Zacks Investment Research
In the past six months, shares of this Zacks Rank #3 (Hold) company have risen 31.8% against the industry’s 4.5% decline.
However, weakness in the consumer retail end markets, owing to a decrease in consumer discretionary spending, remains a concern. This is reflected in the Consumer segment’s revenues, which declined 2.4% in the second quarter. There was a particular weakness in packaging and expression as well as home and auto care businesses. The company expects consumer retail discretionary spending on hardline goods to remain muted for the rest of the year, which is likely to hurt its overall performance.
High debt levels have also been concerning. An elevated debt level raises financial obligations and is likely to drain profitability. 3M exited the second quarter with a long-term debt of $11.8 billion. Also, interest expenses in the second quarter remained high at $322 million, up 123.6% on a year-over-year basis.
Stocks to Consider
Some better-ranked stocks are discussed below.
Federal Signal Corporation (FSS - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Federal Signal delivered a trailing four-quarter average earnings surprise of 12.3%. In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 5.2%.
Vector Group Ltd. (VGR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 15.4%.
In the past 60 days, the Zacks Consensus Estimate for VGR’s 2024 earnings has increased 5.2%.
Parker-Hannifin Corporation (PH - Free Report) currently carries a Zacks Rank of 2. PH delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the consensus estimate for Parker-Hannifin’s fiscal 2025 earnings has increased 1.1%.