3M stock is worth a look because of the company it keeps

3M is a value stock aligned with many of the market’s most disruptive sectors

3M (NYSE: MMM) delivered a double whammy when it reported earnings on April 26. This was not enough to satisfy investors who were in the mood to sell. However, the title is beginning to recover. And MMM stocks are starting to look like a reasonable investment for investors looking for quality stocks to buy on the downside.

A quick look at the company’s earnings shows a nice trend. The company’s first-quarter revenue and profit beat analysts’ expectations. However, both figures were lower than the same quarter of the previous year. But a better comparison might be to go back to the first quarter of the company’s fiscal 2019. And in that regard, the company’s numbers were higher on both counts.

I realize that statistics can say what you want, so let me add some context to my opinion. The first quarter of 2021 marked the start of the economic recovery. So it stands to reason that a company like 3M would see an influx of demand. What I’m most interested in is looking at the company’s profits and revenue year-over-year for the past three years.

Year

Earnings per share (EPS)

Revenue

2021

$10.12

(A d)

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$35.3 billion

2020

$8.75

$32.19 billion

2019

$8.96

$32.40 billion

So why is MMM’s stock falling?

In two words: supply chain. Like virtually all businesses, 3M is affected by supply chain constraints and will likely continue to be so for the foreseeable future. And Chief Executive Officer (CEO) Mike Roman said the company’s supply chain issues are likely to negatively impact the company’s earnings for the rest of the year. Unsurprisingly, analyst sentiment turned bearish in the days following the earnings report. However, the company’s first quarter figures suggest that the company has been reasonably successful in passing on cost increases to its customers.

Help the disruptors

Investors have heard a lot about disruptive technologies these days. But when consumers hear this term, they may think of devices like the smartphone you might be reading this article on. And that’s a great example. However, in 2022, many of the companies disrupting the industry are in areas such as healthcare, artificial intelligence and automation.

3M does business in each of these areas and more. And that’s what I meant in my title when I said MMM stock looks bullish because of the company it’s keeping. As these companies grow their businesses, they will turn to products from suppliers like 3M to keep their supply chains moving. This is an uptrend for 2022.

What to do with 3M stock?

If you need a reason to buy MMM stock right now, all you need to look at is the dividend. 3M is a dividend king, having increased its dividend in each of the past 65 years. But the company also has a dividend yield that is currently over 4%. And considering that earnings are growing and are expected to grow in each of the next five years, the dividend looks very sustainable.

I also consider the company’s price/earnings (P/E) ratio which is 15.44 at the time of this writing. It seems high compared to the industry average. However, compared to the company’s historical average, it’s starting to look attractive.

In the short term, this may mean that MMM stock may continue to be volatile as investors try to confirm that the stock has bottomed. But with stocks trading at the bottom of its 52-week range and below its pre-pandemic level, opportunistic investors should look for an opportunity to add stocks.

Should you invest $1,000 in 3M right now?

Before you consider 3M, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated, top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the market takes off…and 3M wasn’t on the list.

While 3M currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are better buys.

See the 5 actions here

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