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3M vs United Technologies: Which Stock Should You Bet on?
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As the curtain rolls down on the first-quarter earnings, various analysis and comparisons are being done by industry peers to gauge the underlying metrics and relative performance. Let us perform a similar comparative analysis between two stocks in the Diversified Conglomerates sector – 3M Company (MMM - Free Report) and United Technologies Corporation – to pick the better investment option.
First-Quarter Earnings
3M started 2017 on a positive note with strong first-quarter results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,323 million or $2.16 per share compared with $1,275 million or $2.10 per share in the year-earlier quarter. The year-over-year improvement in earnings was largely due to higher sales. The reported earnings exceeded the Zacks Consensus Estimate by 9 cents for an earnings surprise of 4.4%. Net sales during the quarter were $7,685 million, up from $7,409 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $7,515 million for a sales surprise of 2.3%.
United Technologies reported first-quarter 2017 adjusted earnings (from continuing operations) of $1.48 per share, which beat the Zacks Consensus Estimate of $1.39 for an earnings surprise of 6.5%. The company’s bottom line primarily benefited from organic sales growth. Adjusted net sales for the quarter were $13,815 million compared with $13,357 million in the year-earlier quarter. Revenues beat the Zacks Consensus Estimate of $13,316 million for a sales surprise of 3.8%. The rise was primarily attributable to improved performance across all its segments.
Although there seems to be an apparent tie between the stocks relative to the first-quarter earnings, United Technologies has a slight edge over 3M due to a better earnings and sales surprise percentage.
First-Quarter Price Performance
For the first quarter, 3M clearly outperformed United Technologies with an average return of 7.1% compared with 2.4% gain for the latter. During this period, 3M’s shares performed better than the Zacks categorized Diversified Operations industry that gained 1.4%.
Guidance
3M raised its earlier guidance for 2017 on strong quarterly results and improved business outlook. The company anticipates 2017 GAAP earnings in the range of $8.70 to $9.05 per share, up from prior projection of $8.45–$8.80. This represents year-over-year growth of 7–11%, up from 4–8% expected earlier. Organic local-currency sales are expected to be 2–5%, up from 1–3% projected earlier while free cash flow conversion rate is anticipated to be 95–105%.
Incorporating its improved expectations for organic sales growth in the near future, United Technologies reaffirmed its guidance for 2017. The company expects adjusted earnings in the range of $6.30–$6.60 per share on revenues of $57.5–$59 billion. The company’s acquisition expectation is between $1billion and $2 billion and free cash flow guidance is in the range of 90–100% of net income. It also plans to repurchase shares worth $3.5 billion in 2017.
Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Consequently, 3M appears to be better positioned compared to United Technologies with regards to this metric.
Estimate Revisions
Over the last month, 3M’s current-quarter estimates increased from $2.25 to $2.50 per share while that for the current year increased from $8.64 to $8.91.
United Technologies’ current-quarter estimates decreased a penny to $1.76 during the last month while current-year estimates increased a penny to $6.57 per share. With positive estimate revisions, investor sentiments clearly appear to be bullish on 3M compared to United Technologies.
To Sum Up
Based on the current scenario, 3M seems to have trumped United Technologies on most fronts and stands out as a better investment proposition. A couple of other stocks worth considering in the industry include Crane Co. (CR - Free Report) and Federal Signal Corporation (FSS - Free Report) , each carrying a Zacks Rank #2.
Crane has a long-term earnings growth expectation of 10.1%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 8.4%.
Federal Signal topped estimates twice in the trailing four quarters with an average positive earnings surprise of 3.1%.
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3M vs United Technologies: Which Stock Should You Bet on?
As the curtain rolls down on the first-quarter earnings, various analysis and comparisons are being done by industry peers to gauge the underlying metrics and relative performance. Let us perform a similar comparative analysis between two stocks in the Diversified Conglomerates sector – 3M Company (MMM - Free Report) and United Technologies Corporation – to pick the better investment option.
First-Quarter Earnings
3M started 2017 on a positive note with strong first-quarter results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,323 million or $2.16 per share compared with $1,275 million or $2.10 per share in the year-earlier quarter. The year-over-year improvement in earnings was largely due to higher sales. The reported earnings exceeded the Zacks Consensus Estimate by 9 cents for an earnings surprise of 4.4%. Net sales during the quarter were $7,685 million, up from $7,409 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $7,515 million for a sales surprise of 2.3%.
United Technologies reported first-quarter 2017 adjusted earnings (from continuing operations) of $1.48 per share, which beat the Zacks Consensus Estimate of $1.39 for an earnings surprise of 6.5%. The company’s bottom line primarily benefited from organic sales growth. Adjusted net sales for the quarter were $13,815 million compared with $13,357 million in the year-earlier quarter. Revenues beat the Zacks Consensus Estimate of $13,316 million for a sales surprise of 3.8%. The rise was primarily attributable to improved performance across all its segments.
Although there seems to be an apparent tie between the stocks relative to the first-quarter earnings, United Technologies has a slight edge over 3M due to a better earnings and sales surprise percentage.
First-Quarter Price Performance
For the first quarter, 3M clearly outperformed United Technologies with an average return of 7.1% compared with 2.4% gain for the latter. During this period, 3M’s shares performed better than the Zacks categorized Diversified Operations industry that gained 1.4%.
Guidance
3M raised its earlier guidance for 2017 on strong quarterly results and improved business outlook. The company anticipates 2017 GAAP earnings in the range of $8.70 to $9.05 per share, up from prior projection of $8.45–$8.80. This represents year-over-year growth of 7–11%, up from 4–8% expected earlier. Organic local-currency sales are expected to be 2–5%, up from 1–3% projected earlier while free cash flow conversion rate is anticipated to be 95–105%.
Incorporating its improved expectations for organic sales growth in the near future, United Technologies reaffirmed its guidance for 2017. The company expects adjusted earnings in the range of $6.30–$6.60 per share on revenues of $57.5–$59 billion. The company’s acquisition expectation is between $1billion and $2 billion and free cash flow guidance is in the range of 90–100% of net income. It also plans to repurchase shares worth $3.5 billion in 2017.
Zacks Rank & VGM Score
With a Zacks Rank #2 (Buy), 3M has a Value Growth Momentum score (VGM Score) of ‘B’. United Technologies has a VGM Score of ‘C’ and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with a VGM Score of ‘A’ or ‘B’ combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Consequently, 3M appears to be better positioned compared to United Technologies with regards to this metric.
Estimate Revisions
Over the last month, 3M’s current-quarter estimates increased from $2.25 to $2.50 per share while that for the current year increased from $8.64 to $8.91.
United Technologies’ current-quarter estimates decreased a penny to $1.76 during the last month while current-year estimates increased a penny to $6.57 per share. With positive estimate revisions, investor sentiments clearly appear to be bullish on 3M compared to United Technologies.
To Sum Up
Based on the current scenario, 3M seems to have trumped United Technologies on most fronts and stands out as a better investment proposition. A couple of other stocks worth considering in the industry include Crane Co. (CR - Free Report) and Federal Signal Corporation (FSS - Free Report) , each carrying a Zacks Rank #2.
Crane has a long-term earnings growth expectation of 10.1%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 8.4%.
Federal Signal topped estimates twice in the trailing four quarters with an average positive earnings surprise of 3.1%.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>