We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies. In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3M vs. Griffon: Which Industrial Conglomerate Stock is a Stronger Pick?
Read MoreHide Full Article
3M Company (MMM - Free Report) and Griffon Corporation (GFF - Free Report) are both familiar names operating in the Zacks Diversified Operations industry. While 3M operates in the industrial, electrical, transportation, consumer and home care markets, Griffon provides consumer, professional, as well as home and building products in the United States and internationally.
With considerable exposure in consumer and home care markets, both companies invest heavily in research and development to generate innovative products, drive growth and gain market share. But which one is a better investment today? Let’s take a closer look at their fundamentals, growth prospects and challenges to make an informed choice.
The Case for 3M
3M is witnessing solid momentum in the Safety and Industrial segment, driven by strength in roofing granules and electrical markets. Significant orders for aluminum high-capacity conductors and power cable accessories in Asia and the United States, driven by an increase in demand from data centers, augur well in the quarters ahead. The segment’s organic sales improved approximately 2.4% year over year in the fourth quarter of 2024.
The company’s Transportation and Electronics segment is benefiting from strength in the aerospace and electronics end markets. Solid electronics demand, backed by an increase in production volume by electronics original equipment manufacturer (OEM) customers, is proving beneficial for the segment. The segment’s adjusted organic revenues grew 2% in the fourth quarter.
3M is committed to rewarding its shareholders handsomely through dividend payments and share buybacks. In 2024, it paid dividends worth $2 billion and repurchased shares for $1.8 billion. At the end of 2024, the company had $2.4 billion remaining under the share repurchase program. In 2025, it anticipates a gross share repurchase of around $1.5 billion.
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 results, which declined 1.9% in 2024. There was a particular weakness in the packaging & expression, home & auto care and consumer safety and well-being businesses. The company expects consumer retail discretionary spending on hardline goods to remain muted in the near term, which is likely to hurt its overall performance.
MMM’s high debt level remains another concern for its profitability. Exiting 2024, the company’s long-term debt was $11.1 billion. Its short-term borrowings and current portion of long-term debt totaled $1.9 billion. Also, interest expenses in 2024 increased 26.5% year over year to $1.2 billion.
The company has also been subject to several litigations, including earplug lawsuits. It has committed substantial funds to resolve these disputes, as ongoing litigation might lead to additional expenses. Per the terms of the Combat Arms Earplug settlement announced in August 2023, 3M agreed to pay a sum of $6 billion to resolve the litigation case over the period from 2023 to 2029.
The Case for Griffon
Griffon is witnessing strong momentum in the Home and Building Products segment. Increased demand for its products, supported by the resiliency of repair and remodeling activity in the residential construction market, is driving the segment’s results (revenues are flat on a year-over-year basis in the first quarter of fiscal 2025).
The U.S. residential construction market is seeing a recovery in single-family housing, supported by lower interest rates and builder incentives, which is likely to be beneficial for the segment in the quarters ahead. The recovery in the commercial construction market, driven by several projects undertaken by customers, is expected to benefit the segment.
However, tepid consumer demand for project tools, outdoor decor and watering products has been hurting its Consumer and Professional Products segment’s performance. The segment’s revenues declined 4.2% year over year in the first quarter of fiscal 2025.
Griffon continues to invest in the expansion and modernization of its key manufacturing and distribution facilities to drive growth. For instance, the company expanded Clopay's Troy manufacturing facility, which will improve its manufacturing efficiencies and introduce new product lines. It also expanded the sectional door manufacturing capacity in Ohio to cater to the increasing demand for its premium products. Griffon plans to make additional investments in capacity expansion and technology in 2025.
Also, GFF intends to strengthen and expand its businesses through acquisitions. In July 2024, it acquired an Australia-based company, Pope. Pope has expanded its residential watering product portfolio in the Australian market. The acquisition of Pope is anticipated to generate annual revenues of around $25 million and positively impact the company's earnings in the first full year of ownership.
How Does the Zacks Consensus Estimate Compare for MMM & GFF?
While the Zacks Consensus Estimate for MMM’s 2025 sales implies a year-over-year decline of 10%, the same for its earnings per share (EPS) indicates growth of 6.7%. While the EPS estimates for 2025 have declined, the estimates for 2026 have increased over the past 60 days.
Image Source: Zacks Investment Research
While the Zacks Consensus Estimate for GFF’s fiscal 2025 sales implies a year-over-year decline of 1.2%, the same for EPS indicates growth of 11.5%. GFF’s EPS estimates have been trending northward over the past 60 days for both fiscal 2025 and fiscal 2026.
Image Source: Zacks Investment Research
Price Performance and Valuation of MMM & GFF
In the past six months, 3M shares have lost 5.7%, while Griffon stock has inched up 0.4%.
Image Source: Zacks Investment Research
3M is trading at a forward 12-month price-to-earnings ratio of 15.97X, above its median of 12.03X over the last three years. Griffon’s forward earnings multiple sits at 10.80X, close to its median of 10.58X over the same time frame.
Image Source: Zacks Investment Research
Conclusion
3M’s strength in the safety, industrial and transportation markets has been dented by the weakness in its consumer retail market. Also, MMM’s expensive valuation and downward earnings estimate revisions warrant a cautious approach for existing investors.
In contrast, Griffon’s robust momentum in the Home and Building Products segment, growth investments and accretive acquisitions bode well for strong growth in the quarters ahead. Additionally, GFF’s attractive valuation is more appealing and its upwardly revised estimates instil confidence.
Given these factors, GFF seems a better pick for investors than MMM currently. While GFF carries a Zacks Rank #2 (Buy), 3M currently has a Zacks Rank #3 (Hold).
Image: Bigstock
3M vs. Griffon: Which Industrial Conglomerate Stock is a Stronger Pick?
3M Company (MMM - Free Report) and Griffon Corporation (GFF - Free Report) are both familiar names operating in the Zacks Diversified Operations industry. While 3M operates in the industrial, electrical, transportation, consumer and home care markets, Griffon provides consumer, professional, as well as home and building products in the United States and internationally.
With considerable exposure in consumer and home care markets, both companies invest heavily in research and development to generate innovative products, drive growth and gain market share. But which one is a better investment today? Let’s take a closer look at their fundamentals, growth prospects and challenges to make an informed choice.
The Case for 3M
3M is witnessing solid momentum in the Safety and Industrial segment, driven by strength in roofing granules and electrical markets. Significant orders for aluminum high-capacity conductors and power cable accessories in Asia and the United States, driven by an increase in demand from data centers, augur well in the quarters ahead. The segment’s organic sales improved approximately 2.4% year over year in the fourth quarter of 2024.
The company’s Transportation and Electronics segment is benefiting from strength in the aerospace and electronics end markets. Solid electronics demand, backed by an increase in production volume by electronics original equipment manufacturer (OEM) customers, is proving beneficial for the segment. The segment’s adjusted organic revenues grew 2% in the fourth quarter.
3M is committed to rewarding its shareholders handsomely through dividend payments and share buybacks. In 2024, it paid dividends worth $2 billion and repurchased shares for $1.8 billion. At the end of 2024, the company had $2.4 billion remaining under the share repurchase program. In 2025, it anticipates a gross share repurchase of around $1.5 billion.
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 results, which declined 1.9% in 2024. There was a particular weakness in the packaging & expression, home & auto care and consumer safety and well-being businesses. The company expects consumer retail discretionary spending on hardline goods to remain muted in the near term, which is likely to hurt its overall performance.
MMM’s high debt level remains another concern for its profitability. Exiting 2024, the company’s long-term debt was $11.1 billion. Its short-term borrowings and current portion of long-term debt totaled $1.9 billion. Also, interest expenses in 2024 increased 26.5% year over year to $1.2 billion.
The company has also been subject to several litigations, including earplug lawsuits. It has committed substantial funds to resolve these disputes, as ongoing litigation might lead to additional expenses. Per the terms of the Combat Arms Earplug settlement announced in August 2023, 3M agreed to pay a sum of $6 billion to resolve the litigation case over the period from 2023 to 2029.
The Case for Griffon
Griffon is witnessing strong momentum in the Home and Building Products segment. Increased demand for its products, supported by the resiliency of repair and remodeling activity in the residential construction market, is driving the segment’s results (revenues are flat on a year-over-year basis in the first quarter of fiscal 2025).
The U.S. residential construction market is seeing a recovery in single-family housing, supported by lower interest rates and builder incentives, which is likely to be beneficial for the segment in the quarters ahead. The recovery in the commercial construction market, driven by several projects undertaken by customers, is expected to benefit the segment.
However, tepid consumer demand for project tools, outdoor decor and watering products has been hurting its Consumer and Professional Products segment’s performance. The segment’s revenues declined 4.2% year over year in the first quarter of fiscal 2025.
Griffon continues to invest in the expansion and modernization of its key manufacturing and distribution facilities to drive growth. For instance, the company expanded Clopay's Troy manufacturing facility, which will improve its manufacturing efficiencies and introduce new product lines. It also expanded the sectional door manufacturing capacity in Ohio to cater to the increasing demand for its premium products. Griffon plans to make additional investments in capacity expansion and technology in 2025.
Also, GFF intends to strengthen and expand its businesses through acquisitions. In July 2024, it acquired an Australia-based company, Pope. Pope has expanded its residential watering product portfolio in the Australian market. The acquisition of Pope is anticipated to generate annual revenues of around $25 million and positively impact the company's earnings in the first full year of ownership.
How Does the Zacks Consensus Estimate Compare for MMM & GFF?
While the Zacks Consensus Estimate for MMM’s 2025 sales implies a year-over-year decline of 10%, the same for its earnings per share (EPS) indicates growth of 6.7%. While the EPS estimates for 2025 have declined, the estimates for 2026 have increased over the past 60 days.
Image Source: Zacks Investment Research
While the Zacks Consensus Estimate for GFF’s fiscal 2025 sales implies a year-over-year decline of 1.2%, the same for EPS indicates growth of 11.5%. GFF’s EPS estimates have been trending northward over the past 60 days for both fiscal 2025 and fiscal 2026.
Image Source: Zacks Investment Research
Price Performance and Valuation of MMM & GFF
In the past six months, 3M shares have lost 5.7%, while Griffon stock has inched up 0.4%.
Image Source: Zacks Investment Research
3M is trading at a forward 12-month price-to-earnings ratio of 15.97X, above its median of 12.03X over the last three years. Griffon’s forward earnings multiple sits at 10.80X, close to its median of 10.58X over the same time frame.
Image Source: Zacks Investment Research
Conclusion
3M’s strength in the safety, industrial and transportation markets has been dented by the weakness in its consumer retail market. Also, MMM’s expensive valuation and downward earnings estimate revisions warrant a cautious approach for existing investors.
In contrast, Griffon’s robust momentum in the Home and Building Products segment, growth investments and accretive acquisitions bode well for strong growth in the quarters ahead. Additionally, GFF’s attractive valuation is more appealing and its upwardly revised estimates instil confidence.
Given these factors, GFF seems a better pick for investors than MMM currently. While GFF carries a Zacks Rank #2 (Buy), 3M currently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.