3M Company (MMM - Free Report) seems to have lost its sheen, thanks to increasing costs and tax rates, weakness in cash flow generation, forex woes, and high debts. Lowered projections also have adversely impacted the company’s investment appeal.
The conglomerate currently has a Zacks Rank #4 (Sell) and a VGM Score of C.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company belongs to the Zacks Diversified Operations industry, which is at the bottom 40% (with the rank of 153) of more than 250 Zacks industries. We believe that the industry is suffering from adverse impacts of tariffs, high debts due to huge investments required for innovation, rising freight charges and scarcity of skilled workforce. Unfavorable movements in foreign currencies, Brexit and geopolitical tensions are other worries.
It is worth noting that 3M delivered weaker-than-expected results in two of the last four quarters while beating estimates twice. In the last reported quarter, its earnings surpassed the Zacks Consensus Estimate by 7.84%. The company’s average earnings surprise for the last four quarters was negative 1.41%.
A glance at 3M’s price trend in the past three months shows that it has lost nearly 9.1% compared with the industry and S&P 500’s declines of 5.7% and 1%, respectively.
Factors Hurting the Company’s Performance
Top-Line and Bottom-Line Weakness: The company’s second-quarter 2019 top-line results suffered from weakness in automotive and electronics businesses, divestiture impact, and forex woes. Weak sales, rise in costs of sales and the decline in operating results affected bottom-line results. Persistence of such headwinds can negatively impact 2019 results as well.
Notably, the company predicts year-over-year change in organic sales to be (1)-2% in 2019. This compared unfavorably with 3.2% organic growth recorded in 2018. Also, tax rate is expected to be 20-22% in 2019, whereas it reported 20% in 2018.
Earnings for the year will likely be $9.25-$9.75 per share, down from $10.46 recorded in 2018.
The company’s earnings estimates have been lowered, reflecting bearish sentiments. Over the past 60 days, the Zacks Consensus Estimate for 3M’s earnings has declined 0.2% to $9.28 for 2019 and 2.1% to $9.89 for 2020.
3M Company Price and Consensus