Shares of 3M Company (MMM) hit a 52-week high of $135.81 during yesterday’s trading session, before dropping a penny to close the session at $135.80. This reflects a solid year-to-date return of 46.5%. The average trading volume for the last three months aggregated 3.1 million shares.
Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamentals that may further drive the stock upward. The stock is currently trading at a forward P/E of 19.6x and has a long-term earnings growth expectation of 10.7%.
Growth Drivers
Impressive third-quarter 2013 results that comprised higher sales across its businesses, top-line growth and new product launches were the primary driving factors for 3M.
Going forward, 3M expects 9% to 11% growth in earnings per share, 4% to 6% organic revenue growth, 20% return on invested capital and approximately 100% free cash flow conversion in the period from 2013 -2017.
Despite a challenging macroeconomic environment, 3M expects earnings in 2014 to be in the range of $7.30 to $7.55 per share with organic local currency sales growth of 3% to 6%. The company remains focused on inventing new products as it enjoys a competitive advantage worldwide.
3M has also recently increased its quarterly dividend by 35% for the first quarter of 2014. The company expects its 2013-2017 share repurchases to be in the range of $17 billion to $22 billion, up from its previous guidance of $7.5 billion to $15 billion. The company expects to further leverage its balance sheet and aims to provide higher returns to shareholders.
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 a capital structure strategy and increased capital deployment. 3M expects to invest between $5 billion and $10 billion on acquisitions through 2017.
Estimate Revisions
Over the last 7 days, earnings estimates for 2013 and 2014 have inched up by a penny each to $6.71 and $7.41, respectively. We envision a further uptrend for the stock in the near future backed by its strong growth potential.
Other Stocks to Consider
Other stocks that look promising and are worth a look now include Hutchison Whampoa Limited (HUWHY), ITT Corporation (ITT) and CLARCOR Inc. (CLC), each having a Zacks Rank #2 (Buy).
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