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Morningstar’s Analysis

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Despite Solid Second-Quarter Print, We Lower 3M's FVE as a Result of Expected U.S. Tax Reform

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Wide-moat-rated 3M had solid second-quarter results. However, we lower our fair value estimate to $195 per share from $199 previously due entirely to our probability-adjusted U.S corporate tax rate of 26% beginning in 2022. Nonetheless, 3M turned in better-than-expected organic top-line growth, as our earnings and free cash flow projections moved higher, though our overall operating margin assumptions remained untouched. On the heels of this outperformance, management raised its EPS guidance range by 45 cents at the midpoint to $9.90, or good for just shy of a 5% raise. Management also tightened the EPS guide by a dime per share. Finally, management raised its full-year organic top-line guide by 3% to 7.5% at the midpoint.

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Company Profile

Business Description

3M is a multinational conglomerate that has operated since 1902 when it was known as Minnesota Mining and Manufacturing. The company is well-known for its research and development laboratory, and the firm leverages its science and technology across multiple product categories. As of 2020, 3M is organized into four business segments: safety and industrial, transportation and electronics, healthcare, and consumer. Nearly 50% of the company’s revenue comes from outside the Americas, with the safety and industrial segment constituting a plurality of the firm’s net sales. Many of the company’s 60,000-plus products touch and concern a variety of consumers and end markets.

3M Center
St. Paul, MN, 55144
T +1 651 733-1110
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 95,000