Benzinga - by Zacks, Benzinga Contributor.
3M Company (NYSE: MMM) is gaining from strength in the Transportation and Electronics segment and accretive acquisitions despite decreasing demand for disposable respirators and weakness in the consumer retail end markets.
What's Aiding 3M Business Strength: 3M has been witnessing solid momentum in the Transportation and Electronics segment, driven by strength in electronics, automotive and aerospace, commercial branding and transportation end markets. Continued channel inventory normalization supported by the stabilization of electronics demand is proving beneficial for the segment. Strong momentum in the automotive electrification market and an increase in auto OEM (original equipment manufacturer) build rates are expected to augur well for the segment in the quarters ahead.
The segment's organic revenues grew 6.7% in the first quarter. Backed by strength across its businesses, the company provided a stable outlook. For 2024, it estimates the Transportation and Electronics segment's organic sales growth to be up in the low-single digits. For the year, 3M expects total adjusted organic sales to grow in the range of 0-2% year over year.
Structural Reorganization Actions: The company has been undertaking structural reorganization actions to reduce the size of its corporate center, streamline its geographic footprint, simplify the supply chain, align business go-to-market models with customers and optimize manufacturing roles to align with production volumes. These restructuring actions are expected to reduce operational costs and improve margins and cash flow in the long term. These strategies are also expected to yield annual pre-tax savings in the range of $700-$900 million. The company expects these actions to be completed by the end of 2024 with the full impact of benefits starting in 2025. In the first quarter, these actions raised 3M's adjusted operating margin by 400 basis points year over year to 21.9%.
Acquisition Benefits: The company has been strengthening its business through acquisitions. In April 2022, 3M acquired the technology assets of LeanTec. The acquisition has strengthened its ability to deliver a more connected, digital body shop solution via its RepairStack Performance Solutions. The company acquired M*Modal's technology business in February 2019. The buyout expanded its capabilities in the Health Information Systems business. In the first quarter, acquisitions boosted the top line by 0.3%.
Rewards to Shareholders: MMM is committed to handsomely rewarding its shareholders through share buybacks and dividend payments. In the first three months of 2024, it paid dividends worth $835 million and repurchased shares for $21 million. In February 2024, 3M hiked its quarterly dividend by 1%. In 2024, it expects its dividend payout ratio to be approximately 40% of adjusted free cash flow.
In light of the above-mentioned factors, we believe that investors should retain MMM stock for now, as suggested by its Zacks Rank #3 (Hold).
3M Company Price 3M Company price | 3M Company Quote
Stocks to Consider Some better-ranked companies from the Conglomerates sector are discussed below:
Carlisle Companies Incorporated (NYSE: CSL) presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 17%.
The Zacks Consensus Estimate for CSL's 2024 earnings has increased 6.5% in the past 60 days. Shares of Carlisle have gained 76% in the past year.
ITT Inc. (NYSE: ITT) currently carries a Zacks Rank #2 (Buy). It delivered a trailing four-quarter average earnings surprise of 6.5%.
In the past 60 days, the consensus estimate for ITT's 2024 earnings has inched up 1%. Shares of ITT have gained 48.5% in the past year.
Griffon Corporation (NYSE: GFF) presently sports a Zacks Rank of 1. It delivered a trailing four-quarter average earnings surprise of 33.5%.
In the past 60 days, the Zacks Consensus Estimate for GFF's 2024 earnings has increased 10.6%. The stock has risen 82.8% in the past year.
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