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Chemical Companies Last Week: 'Tis the Season for Selling

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Chemical Companies Last Week: 'Tis the Season for Selling PART 2 OF 4

3M Sets the Tone for Fiscal 2017, Provides Guidance

3M provides 2017 guidance

3M (MMM) is in the process of realigning its portfolio to have a more customer-focused business model. As a result, it brought down its business portfolio from 40 to 25. In a press release on December 13, 2016, 3M announced the guidelines for 2017. Below are the guidelines provided by 3M:

  • It expects the EPS (earnings per share) to be $8.45–$8.80. It implies an increase of 4%–8% on a year-over-year basis.
  • It expects organic revenue growth to be 1%–3% compared to fiscal 2016.
  • 3M expects free cash flow conversion of 95%–105% and assumes an operating cash flow of $6.1 billion–$7.1 billion.

3M Sets the Tone for Fiscal 2017, Provides Guidance

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3M said that it will spend ~$1.8 billion on research and development to support its organic growth. In the first nine months of 2016, 3M spent ~$1.3 billion. 3M expects the business transformation plan through divestitures and realignments to result in $500 million–$700 million in cost savings by 2020.

3M’s president and CEO, Inge Thulin, said, “Over the last several years we have taken significant actions to strengthen our technology capabilities, improve our portfolio and cost structure, and make us even more relevant to our customers.”

3M stock price

On December 16, 2016, 3M closed at $177.45 and lost 0.6% for the week. The SPDR Dow Jones Industrial Average ETF (DIA), which holds 6.1% in 3M as of December 16, gained 0.25% for the week and closed at $198.19. 3M’s stock price closed 1.5% higher than the 100-day moving average price of $174.77. It indicates an upward trend in the stock. Analysts expect 3M’s 12-month target price to be at $184.80. It implies a potential return of 4.1% from the closing price as of December 16, 2016. On a year-to-date basis, 3M has gained 17.80%

Notably, investors can hold 3M indirectly by investing in DIA. The fund’s top holdings include Goldman Sachs (GS), United Health Group (UNH), and IBM (IBM) with weights of 8.4%, 5.6%, and 5.8%, respectively, as of December 16, 2016.

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