Will 3M Stock Overcome China Woes in Q4 Earnings?

3M Co. (NYSE: MMM) is scheduled to release its fourth-quarter financial results before the markets open on Tuesday. The consensus estimates are calling for $2.10 in earnings per share (EPS) and $8.12 billion in revenue. The same period of last year reportedly had $2.31 in EPS and $7.95 billion in revenue.

Overall, 3M stock has underperformed the broad markets with a retreat of about 7.5% in the past 52 weeks. In the past quarter, though, the stock is up over 5%.

The underperformance is partly due to negative effects from the trade war with China that resulted in earnings misses. Then came the lawsuits related to chemical products the company made in the last half of the 20th century, for which 3M has already taken a $325 million litigation charge. That doesn’t include personal liabilities, which could run into the tens of billions. The stock is trading at about $5 above its price target.

3M is still technically under relatively new leadership, after Michael Roman was named as chief executive in mid-2018 and the prior CEO, Inge Thulin, was named board chair. Its shares were closer to $196 at that time, or close to $188, if adjusting for dividends.

Shares slid in response to third-quarter earnings, again on talk of slower economies in the United States and in China, as well as in automotive and electronics. The recent acquisition of Acelity may not have been a bad one, but in a conglomerate when the world wants more focused models to pick from, it did come with a negative impact of $0.15 against the earnings per share guidance in the fourth quarter. The company’s new guidance was for $2.05 to $2.15 in earnings per share, after that 15-cent hit, versus consensus estimates.

A few analysts weighed in on 3M ahead of the report:

  • Wolfe Research has a Peer Perform rating.
  • JPMorgan has a Neutral rating and a $150 price target.
  • UBS’s Sell rating comes with a $160 target price.
  • Citigroup has a Neutral rating with a $180 price target.
  • Deutsche Bank rates it as Hold with a $176 price target.
  • RBC has an Equal Weight rating and a $165 price target.

Shares of 3M were last seen trading at $177.92, in a 52-week range of $150.58 to $219.75. The consensus price target is $172.94.

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