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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. 

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Joshua Aguilar does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.