The stock market in 2024 has been a mixed bag so far, with even the “Magnificent 7” starting to show some cracks. While some high flyers of 2023 are still going strong, like Nvidia (NVDA), former growth stock favorites like Tesla (TSLA) have been taking it on the chin. Meanwhile, the Fed looks determined to press ahead with multiple interest rate cuts this year, even as inflation remains stubbornly high.
Against this backdrop, many investors are now seeking out value and stability in this artificial intelligence-fueled market. Known for its 65 years of consistent dividend growth, and a wide-ranging portfolio that includes everything from Post-It Notes to advanced medical tech, 3M Company (MMM) is an S&P 500 Index ($SPX) component that has earned the mantle of Dividend King for its commitment to paying back shareholders.
For investors seeking income stability with a side of growth, here's a closer look at the latest analyst upgrade on this Dividend King.
About 3M Company Stock
Valued at $59.61 billion by market cap, 3M Company (MMM) is based out of St. Paul, Minnesota. The global conglomerate operates across four key segments: Safety & Industrial; Transportation & Electronics; Health Care; and Consumer. With brands as diverse as Bondo, Post-Its, Nexcare, and Scotchgard, the company has over 60,000 brands in its portfolio.
3M stock has been quiet over the past year, up just 5.2% over this period. However, the shares have rallied 25% off their 52-week low, set in October.
As a Dividend King, MMM has raised its dividend payments every year for 65 consecutive years. The company pays a quarterly dividend of $1.51, which translates to a generous forward yield of 5.6%.
At current levels, the stock looks cheap. MMM's forward price/earnings ratio compares favorably to the industrial sector median of 18.95, and it's also a discount to the stock's own 5-year historical average P/E multiple of 15.91. Likewise, the forward price/sales ratio of 1.86 is well below MMM's average multiple of 2.55. Overall, this indicates the stock is relatively undervalued right now.
Speaking of earnings, 3M pulled off a win in 4Q, reporting EPS of $2.42 per share against the expected $2.31. However, the stock gapped lower as investors overlooked the bottom-line beat and focused instead on the full-year forecast, with MMM's guidance for EPS of $9.35 to $9.75 falling short of consensus.
New CEO Sparks a Re-Rating
On March 12, the stock got a shot in the arm when 3M named William M. "Bill" Brown as the incoming CEO, effective May 1. Michael Roman, the outgoing CEO, isn't bowing out completely; he's set to become the Executive Chairman of the 3M board. The succession update comes ahead of a strategic pivot for 3M, as the company looks to spin off its healthcare business into a new entity, Solventum, set to hit the New York Stock Exchange with the ticker SOLV come April 1.
Barclays analyst Julian Mitchell was bullish on the CEO change in a March 19 report, suggesting, "This change is likely to yield a portfolio review" at 3M. The analyst suggests such a move could boost margins for the conglomerate.
3M has also been busy settling scores on the legal front, addressing lawsuits tied to its "forever chemicals" and combat earplugs. These legal battles have cast a shadow on the company's market value, but as resolutions seem within reach, the outlook is clearing up.
Barclays sees this as another upside catalyst, writing, "We now see a more attractive risk/reward than we did in late 2023, as well as an increased range of potential catalysts ahead, to drive a re-rating higher of 3M’s (MMM) very low valuation."
What Do Analysts Expect for 3M Stock?
Analysts at Barclays now consider MMM worthy of an “Overweight,” upgraded from the previous “Equal Weight.” They also hiked the stock's price target to $126 from $111, with the new forecast implying expected upside of 18% to Friday's close.
That said, the rest of Wall Street is more cautious, with the consensus calling MMM a “Hold.” Out of 14 analysts weighing in, only 3 are seeing a "Strong Buy" opportunity, 10 advise a “Hold,” and one outlier suggests a "Strong Sell." The mean price target is $112.75, about 5.5% above Friday's close.
The Bottom Line on 3M Stock
Wall Street experts might be split on the stock's forecast, but 3M stock is inarguably cheap at current levels. Its wide-ranging portfolio, bargain valuation, and strategic initiatives are all appealing, as is the stock's strong history of paying back shareholders. For investors seeking steady income and potential growth, MMM is a familiar name worth considering right now.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
