Nigel Coe of Morgan Stanley maintained an Underweight rating on shares of 3M Co MMM on Wednesday with a price target raised to $154 from a previous $145.
“Is it realistic to assume that 3M's multiple continues to expand from a decade high, relative to EE/MI, with half of earnings per share growth coming below-line, buy backs on a decelerating path and B/S reflation largely done?” Coe questioned in a note. The analyst adds that while he did raise his price target to an 18x multiple, “we still see downside” to his $154 price target.
Coe notes that 3M's long-term core revenue framework was maintained in the 4 percent to 6 percent rage over 2012 through 2017. The analyst suggests that recent performance suggests that the upper end of that range “is likely unattainable, even if the disruptive product pipeline begins to meaningfully accelerate.”
Coe also states that 3M's management has maintained an outlook for flat margins, a “disappointment” for bulls given recent restructuring and productivity initiatives at the company.
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