Skip to Content
Stock Analyst Update

3M Defies Its Critics With a Strong First Quarter

Results from this wide-moat rated company are firmly in line with our expectations.


Wide-moat rated (MMM) posted solid first-quarter results in its first good quarter in recent memory. The firm outperformed sell-side Pitchbook consensus estimates, yet it performed in line with our full-year and consensus high 2020 expectations across nearly all its portfolio. We model each of 3M’s 26 business divisions when we construct our five-year outlook, and we’d loosely say 90% or so of 3M’s businesses performed according to our expectations, based on both results and the narrative we heard on 3M’s first-quarter call. We’re certain there will be puts and takes to our model as the year progresses (like at the margin level in Safety and Industrial, which is performing ahead of expectations, as well as Healthcare, where margins are trailing our near-term expectations); nevertheless, we’re not changing our $170 fair value estimate, particularly as management is taking some cost-out actions in the second quarter it expects will provide it with cost savings of $350 million to $400 million, with minimal headcount interventions.

We did, however, moderate our capital expenditures expectations and suspended repurchases in our model commensurate with management’s commentary on the first-quarter earnings call, but the effect on value was mostly negligible. We disagree with some sell-siders who’ve commented that the dividend could be in jeopardy, but given the difficult environment and the unpredictable nature of 3M’s PFAS liability, we understand it was probably prudent to stall share repurchases (though it illustrates why we don’t care for regular buybacks because they’re often made at inflated prices relative to intrinsic value). And while our GAAP EPS assumptions held constant, we did slightly bring down our adjusted EPS by six cents or so to $8.72 given a non-recurring $39 million litigation tax credit tailwind (net of other litigation charges), arising out of its PFAS environmental settlement with the State of Minnesota back in 2018.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Joshua Aguilar 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:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

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.