3M Stock’s Strong Performance
3M stock (NYSE:MMM) has seen a remarkable 21% over the past month, significantly outperforming the industry’s gain of 4.8%. In comparison, the S&P 500 Index has declined by 0.6%. 3M Stock also outperformed competitors like Danaher Corporation (NYSE:DHR) and PDD Holdings Inc. (NASDAQ:PDD), which recorded returns of 7.3% and 11.2%, respectively, in the same period. As of the last trading session, 3M’s stock closed at $127.05, approaching its 52-week high of $128.65 and significantly above its 52-week low of $71.36.
Factors Driving 3M’s Growth
3M stock’s impressive performance can be attributed to its strong presence and improving conditions across key end markets. The company reported strong financial results for Q2 2024, with adjusted net sales rising 1.1% year over year to $6.02 billion, driven by a 1.2% increase in organic sales. The Transportation and Electronics segment has shown robust momentum, supported by strong demand in electronics, automotive, aerospace, and commercial branding sectors. Increased automotive OEM build rates and growth in electronics are expected to benefit this segment in the future.
The Safety and Industrial segment has also benefited from recovering demand across various end markets, especially in industrial adhesives, personal safety, and automotive aftermarket sectors. For 2024, 3M anticipates total adjusted organic sales to remain flat or increase by up to 2% year over year.
3M is implementing structural reorganization measures to streamline its operations, simplify its supply chain, and optimize its manufacturing processes. These actions are expected to reduce operational costs and improve margins and cash flow over the long term. The company’s adjusted operating margin increased by 440 basis points year over year to 21.6% in Q2 2024.
Shareholder Returns and Valuation
3M continues to reward its shareholders with substantial dividend payouts and share buybacks. In 2023, the company distributed $3.31 billion in dividends and repurchased $33 million in shares. For the first half of 2024, it paid out $1.2 billion in dividends and repurchased shares worth $421 million. Additionally, in February 2024, 3M increased its quarterly dividend by 1%, and the company expects its dividend payout ratio to be around 40% of adjusted free cash flow for 2024.
3M’s trailing 12-month return on equity (ROE) stands at 112.92%, well above the industry average of 29.32%, indicating efficient use of shareholders’ funds. With a trailing 12-month price-to-earnings ratio of 13.49X, significantly lower than the industry average of 20.92X, the stock offers an attractive valuation compared to peers such as Honeywell International Inc. (NASDAQ:HON).
Estimate Revisions
Earnings estimates for 3M for 2024 have increased by 1.6% to $7.20 over the past 60 days, while estimates for 2025 have risen by 1.4% to $7.84. Given the company’s strong long-term prospects, impressive return on equity, and attractive valuation, adding 3M stock to one’s portfolio appears to be a prudent decision. The company’s solid fundamentals suggest it is well-positioned to deliver sustained value and growth to investors over time.
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