3M Company (MMM Quick QuoteMMM - Free Report) is thriving on the back of strength in the automotive aftermarket and electrical markets. Pricing actions and cost-control efforts support the company’s margins. MMM’s commitment to reward its shareholders through dividend payments and share buybacks holds promise.

Let’s delve deeper to unearth the factors that make this Zacks Rank #2 (Buy) company a good investment option.

End-Market Strength: Strength in the automotive aftermarket, electrical markets and abrasives businesses within the Safety and Industrial unit bodes well for 3M. Growth in the advanced materials business should aid the Transportation and Electronics segment. Organic sales growth in the medical solutions and oral care business is benefiting the Healthcare segment, while muted growth in the office and stationery businesses should aid the Consumer unit. With improving supply chains, the company anticipates improvements in organic growth, operating margins, earnings and cash flow in due course of the year.

3M Company Price and Consensus

 

3M Company price-consensus-chart | 3M Company Quote

Cost-Control & Pricing Actions: Pricing actions to mitigate raw material cost inflation, restructuring savings and spending discipline support 3M’s margins. The company is undertaking restructuring actions to reduce costs and improve margins and cash flow in the long term. The organizational restructuring will impact approximately 6,000 positions globally. This is in addition to the reduction of 2,500 global manufacturing roles announced this January. 3M expects these actions to yield annual pre-tax savings of $700 million-$900 million, approximately half of which is expected to be realized in 2023.

Rewards to Shareholders: In 2022, 3M rewarded its shareholders with dividend payments of $3.4 billion. The company bought back shares worth $1.4 billion in the same period. In the first quarter, 3M rewarded its shareholders with dividend payments of $827 million. The company bought back shares worth $29 million in the same period. Strong free cash flow generation supports its shareholder-friendly measures.

In 2022, the company generated an adjusted free cash flow of $4.7 billion with an adjusted free cash flow conversion of 82%. Adjusted free cash flow at the end of  first-quarter 2023 was $946 million, up 24% year over year. Adjusted free cash flow conversion was 87% at the end of the same period. The company anticipates an adjusted operating cash flow of $5.8-$6.3 billion in 2023, reflecting a free cash flow conversion of 90-100%.

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