3M Company (MMM - Free Report) recently announced its decision that it will collaborate with Ford Motor Company (F - Free Report) in the fight against the coronavirus pandemic. Notably, the company will partner Ford for expanding its powered air purifying respirators (“PAPRs”) production.
As noted, the companies will work on combining their complementary capabilities and resources to cater to the increase in global demand for personal protective equipment, on account of the coronavirus-related issue.
Notably, 3M’s PAPRs incorporate a waist-mounted, battery-powered blower, which helps in directing filtered air into the hood. This, in turn, helps in providing respiratory protection to workers in several industries including healthcare.
In response to the surge in demand for personal protective equipment due to the coronavirus outbreak, 3M has increased its production of N95 respirators globally to a rate of almost 100 million per month. It’s worth mentioning here that the company is also focusing on boosting its investments, largely in the United States, in an effort to enhance its global capacity by more than 30 percent in the coming 12 months.
As noted, the company has been manufacturing 35 million respirators per month in the United States, of which over 90 percent are intended for the healthcare industry. Also, it has been manufacturing respirators in its international operations based in Europe, Latin America and Asia Pacific.
Existing Business Scenario
Rising cost of sales is a major concern over the last few quarters. The company's cost of sales increased 6.5% year over year in the fourth quarter of 2019. Also, in the fourth quarter, selling, general and administrative expenses grew 15.3% while research, development and related expenses expanded 19.2%.
Also, a highly leveraged balance sheet can inflate 3M’s financial obligations and subsequently hurt profitability. In the last five years (2015-2019), the company's long-term debt rose 14.9% (CAGR). Notably, the metric stood at $17.5 billion at the end of the fourth quarter of 2019, up 30.6% above the 2018-level. In addition, interest expense (after tax) surged 34% year over year to $0.36 billion in 2019.
Over the past year, the Zacks Rank #5 (Strong Sell) company's shares have lost 34.7%, compared with industry’s decline of 33%.
Stocks to Consider
A couple of better-ranked stocks are Graco Inc. (GGG - Free Report) , and Broadwind Energy, Inc. (BWEN - Free Report) . While Graco sports a Zacks Rank #1 (Strong Buy), Broadwind Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graco delivered positive earnings surprise of 0.40%, on average, in the trailing four quarters.
Broadwind Energy delivered positive earnings surprise of 10.42%, on average, in the trailing four quarters.
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