Category: MMM

MMM – 3M Company (MMM) Presents at J.P. Morgan 2023 Industrials Conference (Transcript)

3M Company (NYSE:MMM) J.P. Morgan 2023 Industrials Conference March 15, 2023 9:50 AM ET

Company Participants

Monish Patolawala – EVP, CFO & Transformation Officer

Conference Call Participants

Steve Tusa – J.P. Morgan

Steve Tusa

Hey, everyone. My name is Steve Tusa. I’m the Electrical Equipment And Multi-Industry Analyst here at J.P. Morgan. Welcome to day two of the J.P. Morgan Industrials Conference. We’re very pleased to kick it off today with 3M and Monish Patolawala, who’s the CFO at 3M. Monish has a few opening remarks. Then we’ll jump right into Q&A. Monish?

Monish Patolawala

Great. Thanks for having us, Steven. I just thought I’d get – I’ll just give a few opening remarks to get everybody caught up on generally what’s been going on with 3M over the last couple of years. 2022 was a pivotal year for 3M, and I mean, you just think about a couple of things. On the operating side, we continue to manage inflation through price actions. We made sure that we took care of our customers’ shortened cycle times, and we focused on making sure that we kept their factories running and their shops running versus ours. And then we also made sure that we made progress on just driving operating rigor. We made – we reached an agreement with the Flemish government to restart our Zwijndrecht operations in Belgium. And at the same time, we exited our Russia facility, our Russia business. Also, when you think at it on the actions we’ve taken on the strategic side, we have set up 3M for a lot of success. The goal is to have two world class companies, as we announced the spin-off of our healthcare business, which right now is on track. The teams are making tremendous progress on that. As always, all those transactions are subject to regulatory approvals. They’re subject to tax opinions, tax letters, final board approval, and other customary regulatory items that we have to work through. But the teams are doing a

MMM – 3M May Have a High Yield, but I’d Keep It at Arm’s Length

3M‘s (MMM -1.02%) 5.5% dividend yield is compelling, but it’s not enough to offset the company’s problems.

A company’s ability to meet guidance and to generate revenue growth and margin expansion are critical considerations when investing in a stock. Unfortunately, based on recent history, 3M is, arguably, failing on all three counts.

Unhappy shareholders

One of 3M’s significant shareholders, Flossbach von Storch, isn’t satisfied with its performance. The asset manager’s co-founder Bert Flossbach has already written to 3M’s management and expressed concern about how it’s being run, and about management’s positive statements regarding the company.

Flossbach has a point. The chart below shows 3M’s recent history of meeting the guidance range for organic local currency growth that management gave at the beginning of each year. Forget about beating the high end of the range: 3M only managed to beat the low end of the guidance range in four of the last nine years, and in one of those (2018) it just scraped through. Moreover, 3M only beat the high end of guidance in 2017 and 2021, when industrial production growth bounced strongly from trough years.

It gets worse. 3M held an investor day in 2016 and targeted annual local-currency organic sales growth of 2% to 5% in 2016-2020; in 2019 it held another investor day and targeted 3% to 5% in 2019-2023. If 3M manages to hit the midpoint of its 2023 guidance, then average annual growth over the 2016-2023 period will be just 1.7%.

Whether you look at it year by year or or over the medium term, 3M’s record of meeting guidance is not good.

Chart comparing 3M's guidance, each year from 2014 through 2023, with actual sales.

Data source: 3M presentations. Chart by author.

Disappointing margin performance

3M traditionally commands relatively high profit margins, partly because it focuses on research and development to create high-quality and differentiated products. The company invented the new-product Vitality Index — a measure, now widely used in industry, of the share of sales coming from products released in the last four years.

Indeed, 3M continues to command excellent gross margins and margins based on earnings before interest, taxation, depreciation, and amortization (EBITDA). Gross margin is helpful as it indicates a company’s pricing power in a marketplace — it only strips out the cost of goods. EBITDA margin also strips out operating expenses.

However, the problem is that neither its gross margin nor its EBITDA margin have gone anywhere over the last decade. A combination of lackluster growth and margin decline doesn’t make good reading for shareholders.

Bar chart showing the performance of 3M's gross margin and EBITDA margin, from 2013 through 2022.

Data source: Chart by author? –EKS

What’s going wrong at 3M

This disappointing operational performance is part of why the stock is down 54% over the last five years compared to the S&P 500‘s 46% gain and the 43% increase at one of its multi-industrial conglomerate peers, Illinois Tool Works.

Meanwhile, CEO Mike Roman earned nearly $6 million in incentive payments (on top of $3.9 million in salary) in 2019-2021, and CFO Monish Patolawala (appointed in July 2020) earned $1.9 million in incentive payments (on top of $1.4 million in salary) in 2020-2021. During these years, management made significant restructuring actions — none of which seem to have improved performance.

3M is having problems maintaining its margins. One obvious answer is to try and raise pricing, but that’s not how 3M operates. Instead, as Patolawala said to Barclays analyst Julian Mitchell on the last earnings call, “as I’ve always said … the volume gives us the best leverage.” In other words, 3M tries to generate margin expansion through growing sales volume (and taking advantage of the benefits of scale) rather than pushing through price increases.

One possibility is that 3M doesn’t have the pricing power to push through price increases without suffering volume decreases. Alternatively, it might not have enough quality in its products to generate the volume necessary to expand its margin. In either case, 3M is not demonstrating the ability to grow margins.

An investor looks at signals reading Sell and Buy.

Image source: Getty Images.

Why guidance matters

Not hitting guidance isn’t just an issue of disappointing investors who bought the stock by failing to pencil in the numbers the company gave earlier; it also raises questions about executive planning. For example, if margins are supposed to expand primarily due to volume growth, and management is getting assumptions about sales volumes wrong, then it’s not hard to see where problems could occur. In addition, a business structured for one volume has a different cost profile than one structured for another.

Indeed, after yet another year of missing guidance and now expecting lower volume in the first quarter, management expects a first-quarter operating profit margin in the mid-teens, compared to 21.4% and 24.1% in the previous two years’ first quarters.

Until management can demonstrate an ability to hit guidance, grow revenue meaningfully, and increase margin, it’s hard to make a case for buying the stock — with or without a 5.5% dividend yield.

MMM – 3M Company (MMM) Presents at Citi 2023 Global Industrial Tech and Mobility Conference (Transcript)

3M Company (NYSE:MMM) Citi 2023 Global Industrial Tech and Mobility Conference February 22, 2023 1:50 PM ET

Company Participants

Mike Roman – Chairman and CEO

Monish Patolawala – EVP, CFO and Transformation Officer

Conference Call Participants

Andrew Kaplowitz – Citi

Andrew Kaplowitz

All right. Good afternoon, everyone, again. We’ll let a few stragglers come in here, but we’ll get started here. We’re extremely excited to have 3M with us today. We’ve got Mike Roman, who is the Chairman and CEO; and Monish Patolawala, who is the EVP, CFO and Transformation Officer.

Mike became CEO in July of 2018; Monish, CFO in July 2020. So Mike, as I walk over to you. I know you want to talk about a few things. So I’ll just turn it over to you, and then we’ll get into a fireside chat.

Mike Roman

Yes. Thanks, Andy, and thanks for hosting us. It’s a pleasure to be here. Yes, I thought I’d just do a quick review of 2022 and then I’ll look into ’23 and kind of kick things off.

So 2022 was a pivotal year for 3M. We not only took actions to manage through some challenges during the year. We also made some big strategic decisions and initiated strategies that are going to be foundational for the future of 3M. Now like everyone, we were managing inflation with pricing actions and cost management and sourcing strategies.

And we navigated the supply chain disruptions really with a focus on our customers, something we talked about during the year. We spent money on to make sure we deliver for customers, including adding a distribution center on the East Coast so that we could access some of the logistics alternatives that we needed.

We also navigated the COVID lockdowns in China. We worked with Flemish authorities

MMM – Why 3M (MMM) is a Top Dividend Stock for Your Portfolio

Whether it’s through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you’re an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company’s earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

3M in Focus

3M (MMM Free Report) is headquartered in St Paul, and is in the Conglomerates sector. The stock has seen a price change of 14.17% since the start of the year. Currently paying a dividend of $1.48 per share, the company has a dividend yield of 2.97%. In comparison, the Diversified Operations industry’s yield is 0.29%, while the S&P 500’s yield is 1.36%.

Taking a look at the company’s dividend growth, its current annualized dividend of $5.92 is up 0.7% from last year. 3M has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.85%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as a dividend. 3M’s current payout ratio is 58%, meaning it paid out 58% of its trailing 12-month EPS as dividend.

MMM is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $10.11 per share, with earnings expected to increase 15.68% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.

For instance, it’s a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It’s more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, MMM is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).

MMM – Shikho, an edtech startup focused on Bangladesh's students, gets $1.3M seed

In Bangladesh, students often rely on after school learning centers for study help or test preparation, but many of the best ones are concentrated in major cities. Edtech startup Shikho was created to make supplementary education more accessible and affordable. The company announced today it has closed a $1.3 million seed round co-led by returning investor LearnStart (the seed fund of edtech investment firm Learn Capital) and Anchorless Bangladesh. 

The round also included participation from Wavemaker Partners and Ankur Nagpal, founder and chief executive officer of online course platform Teachable. Shikho’s last round of funding was $275,000 in pre-seed financing last year from LearnStart and strategic angel investors. 

Founded in April 2019, Shikho is focused on grades 9, 10, 11 and 12, with plans to introduce content for grades 6 up to university level and continuous education. Its learning material, created by educators and subject experts, is based on the Bangladeshi National Curriculum. To keep students engaged, it uses gamification techniques, like points, leaderboards and virtual awards. 

Shikho was founded in April 2019 by CEO Shahir Chowdhury, who previously worked in finance and business, including as a director at HSBC UK’s Private Bank, and chief operating officer Zeeshan Zakaria, who also worked in finance before becoming a mathematics teacher. 

Both grew up in Dhaka before moving to the United Kingdom, where they went to university. Chowdhury told TechCrunch that even while working in finance, his goal was to launch a socially impactful business in Bangladesh. 

At first, Chowdhury looked at fintech because of his career experience, but realized there were already many players focused on financial inclusion in Bangladesh, like bKash. He started thinking about education–Chowdhury’s father is a retired professor and his mother still teaches high school. Then by coincidence, he worked on a client report about the emergence of Indian and Chinese edtech startups, like Byju’s and Toppr. 

“I tried to understand what edtech was and why it was working in those markets and why it didn’t exist in Bangladesh,” said Chowdhury. “When I looked at that closely, there was no reason for it not to exist in Bangladesh. From an macroeconomic perspective, you have all the elements you need. You have a very large population, about 165 million people, and half of that is under the age of 25.”

Chowdhury reached out to Zakaria to lead Shikho’s academic programming. Shikho’s goal is to find more engaging and effective ways to teach students material from the Bangladesh National Curriculum. 

“Not much has changed since my dad was in grade 10 in terms of the syllabus,” said Zakaria. “I’m not a politician, so I can’t bring about change there, but I can change how it’s delivered. We deliver the curriculum in a way that has never been seen before in terms of the pedagogical experience.” 

Shikho launched about a year before the COVID-19 pandemic began, but that didn’t change its approach to product development because it was always meant to be an online learning platform. 

The company works with educators to create content, including animated videos that break down topics into short segments of about six minutes each to help students learn at their own pace. Each video is supplemented with digital resources called smart notes to replace the guidebooks many students buy for studying, and practice questions with detailed solutions.

Shikho’s main video content is pre-recorded, but it will also launch live classes for its app and web portal in about six weeks. The company’s new funding will allow it to scale-up content production, including an app for parents. 

One of the biggest challenges for online learning platforms is keeping students motivated. Chowdhury said Shikho’s gamification system was inspired by the Nike Run Club app. Similar to how Nike Run Club users get points every time they go on a run, Shikho gives students points when they log in, do a test or watch a video. The points can be collected for milestones ranging from beginner to “legend,” and special badges are awarded for accomplishments like finishing a test quickly and accurately. 

The point system also feeds into a leaderboard, so students can see how many points they have compared to other Shikho users at their school, or on the entire app. 

The app is free to use for seven days. One of the company’s plans for its new funding is to launch more freemium content to increase user conversions into paying customers. Chowdhury says that paying users have high engagement rates, typically spending about 45 to 50 minutes daily in the app. Shikho plans to double-down on its user acquisition strategy, including offline sales teams in front of schools, at the end of the year after launching its app for parents. 

“Students are the users and the actual customers are their parents, so we’re conscious that we’re going to have to flip communication to the parents,” said Chowdhury. “That’s part of what this funding round is for.” 

In statement about investment, Anchorless Bangladesh founding partner and CEO Rahat Ahmed said, “Bangladesh has one of the largest allocations of private education expenditure as a percentage of disposable income in the world, but lags behind countries like India and Indonesia when it comes to edtech funding. The market is primed for growth and we believe the team at Shikho is well-fit to lead the charge and take education to the next level.” 

MMM – Call Traders Speculate on MMM Ahead of Earnings

Earnings expectations, Earnings report, Earnings Per Share, Quarterly Earnings

3M will step into the earnings confessional before tomorrow’s open

The shares of 3M Company (NYSE:MMM) are up 0.9%, last seen trading at $202.31 as the company gears up for its second-quarter earnings, due out ahead of the open tomorrow, July 27. Below, we’ll dig into the stock’s technical setup and take a look at how the equity has fared after earnings in the past. 

On the charts, MMM has struggled to find direction since notching a May 5, two-year high of $208.95, which is the same time and price point of a bear gap the equity suffered after being rejected by the $220 level. 3M stock once again has support from the 80-day moving average, and boasts a 26.7% year-over-year lead.

MMM Chart July 26

Call traders are bombarding the blue-chip name ahead of the event. So far today, 8,022 calls have exchanged hands, which is double the amount typically seen at this point, versus 2,970 puts. The September 210 call is the most popular, followed by the August 210 call. This implies that these traders see plenty of upside for 3M stock heading into the latter part of the year.

And that long-term speculation seems like the right call, given that MMM has a history of negative post-earnings reactions. In the last eight reports, 3M stock has logged a positive next-day move just three times. The security has averaged a post-earnings move of 3.4%, regardless of direction. This time around, the options market is pricing in a slightly larger 5.2% move for the stock.

MMM – 3M (MMM) Outpaces Stock Market Gains: What You Should Know

3M (MMM Free Report) closed the most recent trading day at $195.21, moving +1.88% from the previous trading session. This move outpaced the S&P 500’s daily gain of 1.4%.

Prior to today’s trading, shares of the maker of Post-it notes, industrial coatings and ceramics had lost 5.08% over the past month. This has lagged the Conglomerates sector’s loss of 1.87% and the S&P 500’s gain of 1.07% in that time.

Wall Street will be looking for positivity from MMM as it approaches its next earnings report date. This is expected to be July 27, 2021. On that day, MMM is projected to report earnings of $2.20 per share, which would represent year-over-year growth of 23.6%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $8.41 billion, up 17.26% from the year-ago period.

MMM’s full-year Zacks Consensus Estimates are calling for earnings of $9.78 per share and revenue of $34.99 billion. These results would represent year-over-year changes of +11.9% and +8.71%, respectively.

It is also important to note the recent changes to analyst estimates for MMM. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company’s business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.51% higher. MMM is currently a Zacks Rank #3 (Hold).

Digging into valuation, MMM currently has a Forward P/E ratio of 19.59. This represents a discount compared to its industry’s average Forward P/E of 19.72.

Meanwhile, MMM’s PEG ratio is currently 2.06. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. The Diversified Operations industry currently had an average PEG ratio of 1.6 as of yesterday’s close.

The Diversified Operations industry is part of the Conglomerates sector. This group has a Zacks Industry Rank of 45, putting it in the top 18% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow MMM in the coming trading sessions, be sure to utilize

MMM – 3M (MMM) Dips More Than Broader Markets: What You Should Know

3M (MMM Free Report) closed the most recent trading day at $203.73, moving -1.13% from the previous trading session. This change lagged the S&P 500’s 0.08% loss on the day.

Heading into today, shares of the maker of Post-it notes, industrial coatings and ceramics had gained 1.47% over the past month, outpacing the Conglomerates sector’s gain of 0.96% and lagging the S&P 500’s gain of 1.68% in that time.

MMM will be looking to display strength as it nears its next earnings release. On that day, MMM is projected to report earnings of $2.20 per share, which would represent year-over-year growth of 23.6%. Our most recent consensus estimate is calling for quarterly revenue of $8.41 billion, up 17.26% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $9.73 per share and revenue of $34.99 billion, which would represent changes of +11.33% and +8.71%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for MMM. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company’s business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. MMM is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, MMM currently has a Forward P/E ratio of 21.17. This represents a premium compared to its industry’s average Forward P/E of 20.96.

Investors should also note that MMM has a PEG ratio of 2.23 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. MMM’s industry had an average PEG ratio of 1.61 as of yesterday’s close.

The Diversified Operations industry is part of the Conglomerates sector. This industry currently has a Zacks Industry Rank of 71, which puts it in the top 28% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on