A Closer Look at 3M
It may not be a pound-the-table bargain, but we like it as a defensive stock.
3M (MMM) recently completed its acquisition of Acelity, which at an enterprise value of $6.7 billion represents the largest acquisition the company has ever made. We took this opportunity to revisit our assumptions and scrutinize each of 3M’s divisions after its resegmentation from five to four segments earlier this year. We have reduced our fair value estimate to $177 per share from $188 and raised our uncertainty rating to medium from low. We’re retaining our wide moat, stable trend, and exemplary stewardship ratings.
Even after increasing since the deal’s close, the stock still trades at a discount to what we consider its intrinsic value in a diversified industrial space with few bargains (we note that our 5-star price is about $124). As a GDP-plus business, 3M doesn’t offer much in the way of top-line growth. Even so, with speculation regarding an upcoming recession, we like 3M as a defensive stock.
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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