Datasets:

---

Recag

/

Rp_CommonC_481

like 0

ERROR: type should be string, got "https://www.barrons.com/articles/3m-stock-still-has-further-to-fall-analyst-says-51556549135\n3M Stock Still Has Further to Fall, Analyst Says\nAl Root\nApril 29, 2019 10:45 am ET\nPhotograph by Daniel Acker/Bloomberg\n3M shares fell more than 13% on Thursday, after the company reported first-quarter numbers, the stock’s worst one-day loss since 1987. Earnings missed Wall Street estimates and disappointed investors, but the industrial conglomerate also cut 2019 earnings guidance, citing bloated inventories and weaker demand.\nShares ticked up 0.5% on Friday, but are trading down 0.7% on Monday morning, at $190.32.\nMonday morning, Gordon Haskett analyst John Inch cut his rating on 3M shares (ticker: MMM) to Hold from Buy and cut his price target to $185 a share, 3% below recent levels, from $222 a share. Inch says 3M is facing a number of challenges that may prevent the company from reaching its long-term goals. That’s bad news for 3M investors because it puts the company’s premium valuation multiple at risk.\nThe back story. Before 3M reported first-quarter numbers, its shares traded for about 20 times estimated 2019 earnings, in line with historical averages, but at a 22% premium to the Dow Jones Industrial Average and an 18% premium to the industrial stocks in the S&P 500. 3M’s consumer focus and diverse end markets were supposed to make the stock a more defensive play than other industrials.\nWhat’s new. Investor perceptions about 3M’s safety may be changing. In his Monday morning research report, Inch questioned 3M’s first-quarter margins, the effectiveness of prior business restructuring, and growing legal liabilities from old chemical production. In short, he is much more bearish on the company’s stock than in the past.\nAs headwinds are mounting, Inch also worries the company is moving too slowly to address its mounting problems effectively.\n“3M’s response to [first quarter] weakness of cutting [about] 2,000 heads or roughly 2% of the company’s workforce doesn’t strike us as all that aggressive,” Inch wrote. “Moreover, it now seems likely that 3M could struggle to achieve its targeted [two to three percentage point] operating margin growth by 2023 given that the 2019 profit setback (or margin hole) has raised that target requirement” by an additional one percentage point.\nDeclining profit margins means slower profit growth, something investors look askance at.\nLooking ahead.JPMorgan analyst Steve Tusa said on Thursday that 3M stock isn’t “growthy or defensive” any longer. If the company’s price/earnings multiple contracts to that of the average industrial company in the S&P 500, shares could fall to $160 a share, down 16% from recent levels.\nCEO Mike Roman, who took over last summer, has some big shoes to fill. Under his predecessor, Inge Thulin, 3M stock returned more than 16% a year. When Thulin took over, the company’s P/E multiple was 14. When he left, 3M shares fetched more than 20 times estimated earnings.\nRoman needs to find a way to expand 3M profit margins in order to restore investor confidence.\nWrite to Al Root at allen.root@dowjones.com\n3M shares fell more than 13% on Thursday, after the company reported first-quarter numbers, the stock’s worst one-day loss since 1987."