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3M Company

3M Company (MMM) stock has been beaten down since its peak of almost $250 per share in early-2018. After the Q4 2019 and full year earnings release, the stock was punished further. In fact, the stock is trading at levels last seen in early-2016. Furthermore, the stock is not participating in the recent bull market. It is down (~9.3%) year-to-date and has declined over (17%) in the past year as of this writing. To put this in context, the S&P 500 is up about 3.1% year-to-date and is up over 25% in the past year.

Granted, there are good reasons for this since revenue and earnings per share are declining. But with that said, most of the problems faced by 3M are arguably due to tariffs and the global slowdown in manufacturing, which are not directly in the company’s control. There are also ongoing legal difficulties. It is unlikely that 3M’s stock price will fully recover until it returns to top and bottom line growth and litigation is resolved. But with that said, 3M is a well-run industrial conglomerate. The tariff situation is improving, and global manufacturing is bouncing back. Litigation will likely take some time to sort out. In the meantime, the current yield is over 3.6% paying one to wait. I view the stock as a long-term buy.

3M Will Benefit from The Eventual Recovery In Global Manufacturing

3M sells many of its products to other manufacturers. Since global manufacturing was in a recession for much of the past year, 3M’s revenue and earnings have taken a hit. In the U.S. manufacturing activity dropped precipitously since late 2018 as the full brunt of tariffs and trade war took hold. U.S. manufacturing contracted for six straight months at end of 2019, as seen in the chart below. The automotive industry had (1.3%) lower sales in 2019 than in 2018. The energy sector has experienced declining rig counts…

Disclosure: I am long MMM.

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