3M Forecasts, Target Updated At Credit Suisse
In a report published Monday, Credit Suisse analyst Julian Mitchell maintained a Neutral rating on 3M Co. (NYSE: MMM), while lowering the price target from $178 to $169, following a re-evaluation of the company's EV/EBITDA projections and P/E multiples versus relevant peers in the EE/MI segment.
For 2016, the analyst expects the company to post sales growth of 3 percent, with EBIT margin of 24.5 percent, Terminal Growth of 2 percent and WACC of 7 percent. In addition, the EPS estimates 2015, 2016 and 2017 have been lowered from $7.95, $8.90 and $9.60 to $7.88, $8.81 and $9.60, respectively.
According to the Credit Suisse report, "If the company undertakes large acquisitions with its under-levered balance sheet, there could be integration risks associated with these acquisitions, and a risk of subsequent write-downs of intangible assets if the acquisitions' earnings fall short of company expectations."
The analyst also believes that given the cyclicality of the Electronics & Energy business, the consensus estimates, which assume steady growth, "could prove too optimistic." In addition, given that 3M has a higher than sector average share of earnings from overseas, any continued rally of the U.S. dollar against other currencies would lead to a decline in the Street earnings estimates and the guidance.
"The valuation multiple is at elevated levels relative to the company's history; any earnings disappointment could therefore cause a disproportionate drop in the stock price," the Credit Suisse report added.
Latest Ratings for MMM
|Dec 2016||RBC Capital||Upgrades||Underperform||Sector Perform|
|Nov 2016||Goldman Sachs||Downgrades||Neutral||Sell|
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