3M to Maintain Its Industry-Leading Profitability
Company announces unchanged operating guidance, plan to return cash to shareholders.
At its analyst briefing, wide-moat 3M (MMM) reiterated its annual operating goals for the period through 2017, which are in line with our own expectations and are unchanged from the five-year plan offered a year ago. We applaud the company for maintaining its industry-leading profitability, and we expect operating margins to remain lofty (near 22%) over the long run thanks to continued portfolio pruning, a new rollout of enterprise resource planning software, and accretive bolt-on acquisitions. Moreover, the firm should see a beneficial mix shift, as emerging markets represent an increasing portion of 3M’s sales and the company enjoys stronger profitability in these regions.
We plan to maintain our $120 per share fair value estimate in light of 3M's reiterated annual operating goals through 2017 of 4%-6% organic revenue growth, 9%-11% earnings-per-share growth, 20% returns on invested capital, and free cash flow roughly 100% of net income. For 2014, management expects 3%-6% organic revenue growth and earnings per share in the range of $7.30-$7.55; we currently forecast organic gains of about 5%-6%, and EPS of $7.52.
Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.