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3M Completes Its Communication Markets Division Sale to Corning

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3M’s Communication Markets business

On June 4, 3M (MMM) announced that it had completed the sale of most of its Communication Markets business to Corning (GLW). MMM entered into a definitive agreement with GLW in December 2017, and the deal was expected to garner $900.0 million for 3M.

At present, 3M is expected to garner $870.0 million, as the telecommunications system integration services portion of the business—located in Hannover, Germany—is still pending. This is expected to be completed by the end of 2018 and is valued at $30.0 million.

The global sales of this business total ~$400.0 million per year. As part of the deal, GLW is expected to obtain 3M’s optical and copper passive connectivity that includes xDSL, FTTx, and structured cabling solutions.

As a result of this deal, 3M’s revenues would be impacted from the third quarter onward. However, MMM expects to gain $0.40–$0.45 per share through this divestiture for its fiscal 2018 earnings.

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3M’s stock performance

On June 8, 3M’s stock price gained 3.5% and closed at $206.59. Despite robust gains, 3M traded 6.6% below its 100-day moving average price of $221.17, which indicates a downward trend in the stock. On a YTD (year-to-date) basis, 3M has fallen 12.2%.

Among its peers, General Electric (GE), Honeywell (HON), and Deere (DE) have fallen ~22.5%, 1.0%, and 0.6%, respectively. Analyst consensus on the stock has reduced 3M’s target price to $213.00, implying a return potential of 3.1% over its June 8 closing price. Plus, 3M’s 14-day relative strength index of 59 indicates that the stock neither overbought nor oversold.

Investors can hold 3M indirectly by investing in the SPDR Dow Jones Industrial Average ETF (DIA), which invested 5.6% of its portfolio in 3M on June 8.

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