3M’s Valuations Compared to Its Peers



3M’s forward PE multiple

As of August 30, 3M’s (MMM) one-year forward PE multiple is 19.24x. In comparison, Honeywell (HON) and Stanley Black & Decker (SWK) have one-year forward PE multiples of ~18.5x and 15.60x, respectively. The forward PE multiple takes future earnings into consideration.

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Is 3M overvalued?

The above graph shows that 3M is trading at a higher multiple than its peers. 3M’s valuations corrected after it made a downward revision to its fiscal 2018 EPS. In the next four quarters, analysts expect 3M to report an adjusted EPS of $10.72, which implies 12.6% growth over the previous four quarters. The projected earnings growth is expected to be driven by synergies from the consolidation and strong organic growth backed by new client orders. However, 3M could face the heat of the strong dollar. The continued increase in raw material prices could have a negative impact on the company’s earnings and margins.

Analysts expect Honeywell and Stanley Black & Decker’s adjusted EPS in the next four quarters to be ~$8.41 and $8.55, respectively. The adjusted EPS represents 10.6% and 5.7% growth, respectively. 3M’s projected adjusted EPS is better than its peers. 3M commands a premium to its peers.

Investors could hold 3M indirectly by investing in the Invesco Dow Jones Industrial Average Dividend ETF (DJD), which has invested 2.7% of its portfolio in 3M. The fund also provides exposure to DowDuPont (DWDP) with a weight of 2.8% as of August 30.


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