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Here's Why Investors Should Avoid 3M (MMM) Stock Right Now
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3M Company (MMM - Free Report) continues to grapple with the headwinds that have marred its operational performance over the past few quarters. We expect that rise in operating expenses, among other factors, will further hinder the company’s growth.
The company has failed to impress investors with its recent earnings streak, as its earnings surpassed estimates only once in the four trailing quarters. Year to date, 3M has lost 15.9% compared with the industry’s decline of 16.5%. Further, the Zacks Consensus Estimate for 2018 earnings has moved south in the past month from $10.27 to $10.02. This indicates exceedingly bearish analyst sentiment, reflected by six downward estimate revisions versus none upward, over the same time frame.
Read on to find the major factors affecting the Zacks Rank #4 (Sell) company’s prospects and why it may be prudent to avoid the stock at the moment.
Factors at Play
Over the past several quarters, 3M has been witnessing rising cost of sales. Notably, the company's cost of sales jumped 6.4% in 2017. Also, the metric escalated 5.1% and 2.5% in second quarter and third quarter of 2018, respectively. High retirement benefit cost, interest expenses and inflation in the prices of major inputs had primarily resulted in the rise. 3M believes that material inflation will linger in the remainder of 2018. Rising cost, if not checked, will continue to weigh on the company's profitability in the upcoming quarters.
Also, 3M faces tremendous local competitive pressure in Brazil, China, India as well as Indonesia. In order to hedge the competitive pressure, the company has to invest significantly in R&D to locally develop and manufacture new products. These are likely to put pressure on the company's finances and hence might affect its profitability.
Moreover, on a P/E(TTM) basis, the stock looks overvalued compared with the industry with respective tallies of 20.3x and 17.7x for the past three-month period. This makes us cautious about the stock.
This apart, the company remains exposed to risks associated with adverse changes in foreign currency exchange rates, interest rates and commodity prices. As a matter of fact, changes in these factors may impact 3M’s financials and operations.
Stocks to Consider
Some better-ranked stocks from the same space are Macquarie Infrastructure Company , ITT Inc. (ITT - Free Report) and Crane Company (CR - Free Report) . While Macquarie Infrastructure sports a Zacks Rank #1 (Strong Buy), ITT and Crane Company carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Macquarie Infrastructure surpassed estimates twice in the trailing four quarters, the average positive earnings surprise being 3.85%.
ITT surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 5.72%.
Crane Company outpaced estimates in each of the preceding four quarters, the average earnings surprise being 5.04%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Here's Why Investors Should Avoid 3M (MMM) Stock Right Now
3M Company (MMM - Free Report) continues to grapple with the headwinds that have marred its operational performance over the past few quarters. We expect that rise in operating expenses, among other factors, will further hinder the company’s growth.
The company has failed to impress investors with its recent earnings streak, as its earnings surpassed estimates only once in the four trailing quarters. Year to date, 3M has lost 15.9% compared with the industry’s decline of 16.5%. Further, the Zacks Consensus Estimate for 2018 earnings has moved south in the past month from $10.27 to $10.02. This indicates exceedingly bearish analyst sentiment, reflected by six downward estimate revisions versus none upward, over the same time frame.
Read on to find the major factors affecting the Zacks Rank #4 (Sell) company’s prospects and why it may be prudent to avoid the stock at the moment.
Factors at Play
Over the past several quarters, 3M has been witnessing rising cost of sales. Notably, the company's cost of sales jumped 6.4% in 2017. Also, the metric escalated 5.1% and 2.5% in second quarter and third quarter of 2018, respectively. High retirement benefit cost, interest expenses and inflation in the prices of major inputs had primarily resulted in the rise. 3M believes that material inflation will linger in the remainder of 2018. Rising cost, if not checked, will continue to weigh on the company's profitability in the upcoming quarters.
Also, 3M faces tremendous local competitive pressure in Brazil, China, India as well as Indonesia. In order to hedge the competitive pressure, the company has to invest significantly in R&D to locally develop and manufacture new products. These are likely to put pressure on the company's finances and hence might affect its profitability.
Moreover, on a P/E(TTM) basis, the stock looks overvalued compared with the industry with respective tallies of 20.3x and 17.7x for the past three-month period. This makes us cautious about the stock.
This apart, the company remains exposed to risks associated with adverse changes in foreign currency exchange rates, interest rates and commodity prices. As a matter of fact, changes in these factors may impact 3M’s financials and operations.
Stocks to Consider
Some better-ranked stocks from the same space are Macquarie Infrastructure Company , ITT Inc. (ITT - Free Report) and Crane Company (CR - Free Report) . While Macquarie Infrastructure sports a Zacks Rank #1 (Strong Buy), ITT and Crane Company carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Macquarie Infrastructure surpassed estimates twice in the trailing four quarters, the average positive earnings surprise being 3.85%.
ITT surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 5.72%.
Crane Company outpaced estimates in each of the preceding four quarters, the average earnings surprise being 5.04%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>