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A Steady Stock In An Unsteady Market
While the stock market continues what may be generously called its lackluster summer, with troubling headlines that underscore continuing concerns for the economy, fundamental investors should look for stocks of solid companies in what are very uncertain times. One such company is 3M (NYSE:MMM).
IN PICTURES: Break Into Forex In 12 Steps
Solid, Steady, Unspectacular
3M, the conglomerate with a $50 billion plus market cap, operates in the broad field along with well known names such as United Technologies (NYSE:UTX), Honeywell (NYSE:HON) and others. 3M operates in six divisions: industrial and transportation, health care, consumer and office, safety and protection, display and graphics, and electro and communications. While 3M is known by consumers for its staple of consumer products such as Post-It notes or Scotch Tape, 3M is vastly more than this. The company registered $23 billion in sales last year, of which $14.6 billion were international sales spread over 65 countries. It continues to make new global capital expenditures.
A Conglomeration Of Results
3M posted earnings per share of $4.94 for fiscal 2008, $4.55 for 2009, and had a first quarter this year that nearly doubled its earnings from last year's first quarter. Revenue followed the same pattern, with sales at $25 billion in 2008, $23 billion in 2009, and a significant surge in Q1 this year to $6.3 billion compared to nearly $5.1 billion in last year's Q1. This is a worthy performance coming through the recession.
Competitors' Financial Results
Honeywell, for example, had a rougher time with its earnings trough, while Danaher Corp (NYSE:DHR), another conglomerate, had to fight through similar business headwinds. United Technologies saw its 2009 revenues slide below its 2007 figures. Another big name among conglomerates, Tyco International (NYSE:TYC), is still trying to dig its way back from a poor 2009. All this shows that 3M's results are impressive on a relative basis considering how the global recession dented all the major conglomerates.
3M Foundation and Future
3M's sales projections for the second quarter were recently raised to $6.6-6.75 billion, with predicted sales volume increased 16% to 18%. 3M's EPS estimates for fiscal 2010 project an increase of 19 percent to $5.59 and with a 10 percent increase in 2011, to $6.20. The stock has traded recently below $80, down from its 52-week high of $90, with a 15.5 P/E, and a yield of 2.67 percent. The balance sheet looks good, which after the first quarter of this year showed net cash of $4.6 billion with long-term debt of $5 billion. The company produced $4 billion in free cash flow in 2009, and there's no reason to think it won't keep this up.
3M for Investors
We've written before about 3M stock as a bulwark or core stock for long-term fundamental investors. Its stock price has come down while its prospects are rising. This points toward the best of possible worlds for value and growth investors. Even in the lousy last decade of the stock market, 3M stock has gone from $40 a share to as high as $95. The stock has the potential to grow again. 3M is a good buy now in an unpleasant market, and if the stock price falls into the low $70s range or below, it could be a sensational buy. (Learn more about investing in conglomerates, read Conglomerates: Risky Proposition?)
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IN PICTURES: Break Into Forex In 12 Steps
Solid, Steady, Unspectacular
3M, the conglomerate with a $50 billion plus market cap, operates in the broad field along with well known names such as United Technologies (NYSE:UTX), Honeywell (NYSE:HON) and others. 3M operates in six divisions: industrial and transportation, health care, consumer and office, safety and protection, display and graphics, and electro and communications. While 3M is known by consumers for its staple of consumer products such as Post-It notes or Scotch Tape, 3M is vastly more than this. The company registered $23 billion in sales last year, of which $14.6 billion were international sales spread over 65 countries. It continues to make new global capital expenditures.
A Conglomeration Of Results
3M posted earnings per share of $4.94 for fiscal 2008, $4.55 for 2009, and had a first quarter this year that nearly doubled its earnings from last year's first quarter. Revenue followed the same pattern, with sales at $25 billion in 2008, $23 billion in 2009, and a significant surge in Q1 this year to $6.3 billion compared to nearly $5.1 billion in last year's Q1. This is a worthy performance coming through the recession.
Honeywell, for example, had a rougher time with its earnings trough, while Danaher Corp (NYSE:DHR), another conglomerate, had to fight through similar business headwinds. United Technologies saw its 2009 revenues slide below its 2007 figures. Another big name among conglomerates, Tyco International (NYSE:TYC), is still trying to dig its way back from a poor 2009. All this shows that 3M's results are impressive on a relative basis considering how the global recession dented all the major conglomerates.
3M Foundation and Future
3M's sales projections for the second quarter were recently raised to $6.6-6.75 billion, with predicted sales volume increased 16% to 18%. 3M's EPS estimates for fiscal 2010 project an increase of 19 percent to $5.59 and with a 10 percent increase in 2011, to $6.20. The stock has traded recently below $80, down from its 52-week high of $90, with a 15.5 P/E, and a yield of 2.67 percent. The balance sheet looks good, which after the first quarter of this year showed net cash of $4.6 billion with long-term debt of $5 billion. The company produced $4 billion in free cash flow in 2009, and there's no reason to think it won't keep this up.
3M for Investors
We've written before about 3M stock as a bulwark or core stock for long-term fundamental investors. Its stock price has come down while its prospects are rising. This points toward the best of possible worlds for value and growth investors. Even in the lousy last decade of the stock market, 3M stock has gone from $40 a share to as high as $95. The stock has the potential to grow again. 3M is a good buy now in an unpleasant market, and if the stock price falls into the low $70s range or below, it could be a sensational buy. (Learn more about investing in conglomerates, read Conglomerates: Risky Proposition?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
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