3M

3M Shares Slump as it Keeps Full-Year Guidance Unchanged

3M Company shares slumped about 4% on Tuesday after the maker of N95 masks kept its full-year 2021 guidance unchanged despite beating earnings estimates for the first quarter.

The U.S. technology company said net sales grew about 10% to $8.9 billion, beating the market expectations of $8.47 billion. Both first-quarter GAAP and adjusted earnings were $2.77 per share, resulting in year-on-year increases of 23% and 27% on a GAAP and adjusted-basis, respectively. That was higher than Wall Street’s consensus estimates of $2.25 per share.

3M’s full-year 2021 guidance remains unchanged with earnings expected to be in the range of $9.20 to $9.70 per share. The company expects its full-year total sales growth in the range of 5 to 8% with organic local-currency growth between 3 to 6%.

Following this, 3M shares slumped over 3.6% to $192.43 on Tuesday.

Analyst Comments

“The trend of significant beats and modest raises or limited updates to full-year guidance has been more prominent this quarter but with consensus near the high end as management reiterates following a significant beat, the line between conservatism and caution could be a bit blurrier. Price/cost was negative in the quarter and commentary appears to imply that trend continues, which is a rarity for 3M,” noted Joshua Pokrzywinski, equity analyst at Morgan Stanley.

“Outside of Health Care, some of the biggest Y/Y drivers of improvement were in businesses with less visibility: Personal Safety, Electronics, Automotive, and Home Improvement. Strength in HC and other “general industrial” verticals should be sustainable though.”

3M Stock Price Forecast

Eight analysts who offered stock ratings for 3M in the last three months forecast the average price in 12 months of $192.88 with a high forecast of $202.00 and a low forecast of $175.00.

The average price target represents a -0.59% decrease from the last price of $194.02. Of those eight analysts, two rated “Buy”, four rated “Hold” while two rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price of $200 from $258 with a high of $232 under a bull scenario and $161 under the worst-case scenario. The firm gave an “Equal-weight” rating on the technology company’s stock.

Several other analysts have also updated their stock outlook. Zacks Investment Research upgraded shares of 3M from a “hold” rating to a “buy” rating and set a $196 price target. Citigroup lifted their price objective to $188 from $185. Barclays lifted their price objective to $180 from $163 and gave the company an “underweight” rating.

Upside and Downside Risks

Risks to Upside: A resolution of the PFAS issue would drive a positive reaction in the stock and multiple re-rating. Accelerating end-market demand driving growth well in excess of GDP – highlighted by Morgan Stanley.

Risks to Downside: A majority of 3M’s businesses are levered to general industrial short cycle momentum. A broader industrial slowdown could disproportionately impact 3M’s ability to hit its LT targets.

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