Market Overreacting to 3M's Poor Results
The firm may have reserved growth opportunities, but it remains high-quality and shareholders can benefit from dividends and buybacks.
Joshua Aguilar: 3M's results were a little disappointing today, which prompted management to reduce both top-line and EPS guidance for the remainder of the full year. That said, we're not expecting a material change to our fair value estimate of $193. We've long been on the on low end of the range of price targets against our counterparts on the street. We see the stock's 7% dip as an overreaction to the news. We continue to view 3M as a high-quality, well-run company with about a 3% dividend yield. However, it's also a firm with more reserved growth opportunities across its addressable markets.
Looking at its segments' most recent results, it's a bit of a tale of two cities. The firm's healthcare segment saw organic revenue decrease over 1% year over year, primarily off a tough comp from last year's third quarter, as well as a slowdown in drug delivery. We're really not too concerned, as drug delivery is a project-based business which is tied to the pharma industry's regulatory cycle.
Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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