3M shares rise amid turnaround momentum

3M New York Stock Exchange: mmm She faced many difficulties but overcame them and embarked on a new era of growth. Obstacles, including multiple legal issues, are in the rearview mirror, and the road ahead is clearer. This path includes resuming growth, improving cash flow, strengthening the balance sheet, and achieving a strong return on capital. The stock price actually increased by 100% due to the change in market direction; Signs in January are that this uptrend has room to continue and could advance another $75 to make a new all-time high, and the move could be fast.

An important detail is the company’s return on capital. With the legal issues behind it, the capital outlook is sound, and the outlook is strong. The company expects free cash flow growth in 2025 and free cash flow conversion of approximately 100%. Free cash flow in 2024 has allowed the company to maintain its dividend, which is close to a 2% yield before the Q4 release and stock buybacks, which are significant. The company reduced the count by just 0.27% for the year but by 1.6% in the fourth quarter, marking the peak of activity keeping the share count down leading to fewer buybacks in 2025 and beyond.

Highlights: Good balance sheet. The balance sheet reflects the impact of divestitures and acquisitions but is healthy, leaving the company in a strong position to execute its strategy. The company is well capitalized with low leverage. The cash balance fell slightly to $5.7 billion, but was offset by a significant increase in short-term investments that put it in a strong position. Current and total assets and liabilities decreased, resulting in a decline in stock value but offset by lower share counts and growth expectations.

Guidance for 2025 is adjusted organic growth of 2% to 3%, which is better than analyst expectations and combined with a strong earnings outlook. The midpoint of the guidance range matches the reported MarketBeat consensus, a reassuring number that would likely be considered dovish in hindsight.

3M shares rose 5% after mixed results

3M’s fourth-quarter results were mixed relative to analyst expectations, but there were so many factors at play that a slight error in the results can easily be overlooked. The company’s net revenue of $5.58 billion fell 24.6% due to the divestiture but was lost by only 85 basis points, with total fourth-quarter sales up 0.1% and organic revenue up 2.1%. Importantly, margin remained strong, with GAAP results improving by about 300 basis points and adjusted margin relatively flat. Adjusted margin fell just 0.2%, resulting in better-than-expected results and is expected to remain healthy in 2025. Adjusted earnings of $1.68 fell just 2% compared to a top line contraction of nearly 25% and $0.14 ahead of expectations.

3M’s results should support bullish analyst trends in 2025. These include increased coverage, improving sentiment and a higher price target. Coverage has increased 60% since the 2023 low, while sentiment has improved from low buy to moderate buy. Activity prior to the report included some reductions in target prices but to levels above consensus, up 35% from January 2024 to January 2025. The mid-January 2025 consensus target assumes the fair value of this industrial stock at the $140 level; The high-end range implies a 35% upside in 2025.

3M is in a strong uptrend, melting higher on improving results, outlook and return of capital

3M’s price action is as strong as can be, showing bullish conditions on the daily, weekly and monthly charts that confirm a market reversal. The price action leading up to the Q4 results is a bull flag pattern confirmed by the early market action that followed it. Assuming the market maintains upward momentum, it could rise by an amount equal to the flag bar from the breakout point, which is around $75, from low to high. In this scenario, MMM stock could advance $75 by early summer and continue to advance from there.

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