3M (NYSE: MMM) reported strong Q2’24 results, with revenues and earnings surpassing analyst expectations. The company reported adjusted revenue of $6.0 billion and earnings of $1.93 per share, compared to consensus estimates of $5.9 billion and $1.68, respectively. Following the earnings beat, 3M raised its full-year outlook, leading to a 20% rally in its stock. Despite this, analysts believe MMM stock is now fully valued at around $125. In this article, we will discuss 3M’s stock performance, key takeaways from its recent results, and valuation.
In recent years, 3M stock has shown minimal growth, hovering around $120 in early 2021 to approximately $125 now. This is in contrast to the S&P 500, which has seen a 45% increase over the same timeframe. MMM stock has consistently underperformed the broader market, with returns of 5% in 2021, -29% in 2022, and -2% in 2023, compared to the S&P 500’s returns of 27%, -19%, and 24% over the same years. This points to MMM’s underperformance in comparison to the benchmark index.
In a volatile market environment with high oil prices and increasing interest rates, analysts are cautious about MMM’s future performance. They believe that the stock is currently appropriately priced, with a valuation of around $117 per share, slightly below its current level of $125. This valuation is based on a 16x P/E multiple for 3M, with expected earnings of $7.21 per share for the full year 2024. The 16x P/E figure aligns with the stock’s historical average over the last five years.
In its Q2 results, 3M reported revenues of $6.3 billion, a slight decrease of 0.5% year-over-year. The Transportation and Electronics, Safety & Industrial, and Consumer segments all saw declines in sales. Despite this, 3M’s adjusted EBITDA expanded by 430 basis points to 26.2%, leading to a 39% increase in adjusted earnings per share to $1.93. Looking ahead, 3M expects organic sales to grow by up to 2% for the full year, with adjusted earnings per share projected to be between $7.00 and $7.30.
While 3M had a strong Q2, analysts believe that the stock is now fully valued following its recent rally. Investors looking to enter MMM may be advised to wait for a potential dip in the stock price. Additionally, it is helpful to compare 3M’s performance with that of its peers across industries to gain a better understanding of its relative position in the market. By looking at peer comparisons, investors can make more informed investment decisions.
