3M Hits 52-Week High on Solid 2015 Outlook & Dividend Hike - Analyst Blog

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Shares of diversified conglomerate 3M Company (MMM) hit a new 52-week high of $166.09 on Dec 19, 2014, before closing the trading session a notch lower at $165.48. This translates to a healthy one-year return of 21.0%.

Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has the wherewithal to further drive its price upward. The stock is currently trading at a forward P/E of 22.1x and has a long-term earnings growth expectation of 11.1%.

Growth Drivers

3M recently reiterated its long-term outlook in an investor presentation, based on healthy productivity gains and solid organic-growth driven model. At the same time, the company offered specific earnings guidance for 2015 and announced a dividend hike for the first quarter.

For the five-year period from 2013−17, 3M affirmed its financial objectives and remained confident of achieving its set targets. These include average earnings per share growth of 9%−11% per year, average organic sales growth of 4%−6% per year, a 20% return on invested capital and 100% conversion of net income to free cash flow.

Portfolio management, investment in innovation, and business transformation are the three key levers on which the company intends to focus moving forward. 3M will also continue to invest in capital expenditures and research and development to support organic growth as it aims at a capital structure strategy and increased capital deployment.

For 2015, 3M expects earnings in the range of $8.00 to $8.30 per share, with organic local currency sales growth of 3%−6% and free cash flow conversion of 90%−100%. The current Zacks Consensus Estimate for 2015 is pegged at the higher end of the guidance at $8.22.

The company also increased its first-quarter 2015 dividend by 20% year over year to $1.025 per share. The proposed dividend is payable on Mar 12 to shareholders of record as of Feb 13. The current dividend hike is the 57th consecutive annual dividend increase for the company and the 98th uninterrupted yearly dividend payment.

Other Stocks to Consider

Other companies in the industry that are worth mentioning include Federal Signal Corp (FSS) carrying a Zacks Rank #1 (Strong Buy), and Carlisle Companies Inc. (CSL) and EnPro Industries, Inc. (NPO), both carrying a Zacks Rank #2 (Buy).


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3M CO (MMM): Free Stock Analysis Report

CARLISLE COS IN (CSL): Free Stock Analysis Report

FED SIGNAL CP (FSS): Free Stock Analysis Report

ENPRO INDUS INC (NPO): Free Stock Analysis Report

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