3M Company’s MMM investors have been witnessing some impressive gains from the stock of late. The conglomerate giant’s shares have surged 21.5% in the past six months, outpacing the S&P 500 composite’s growth of 13.4% and the industry’s decline of 7.8%. The company has also outperformed other industry players like Honeywell International Inc. HON and Carlisle Companies Incorporated CSL, which have returned 4.4% and declined 8.7%, respectively, over the said time frame.

MMM Stock’s Six-Month Price Performance

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Closing at $149.87 in the last trading session, the stock is trading close to its 52-week high of $155 and significantly higher than its 52-week low of $75.65. 3M stock is trading above both its 50-day and 200-day moving averages, indicating solid upward momentum and price stability. This reflects a positive market sentiment and confidence in the company's financial health and long-term prospects.

MMM Stock Trading Above 50-Day & 200-Day Moving Averages

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What’s Behind 3M Stock’s Momentum?

The strongest driver of 3M’s business at the moment is solid momentum in the Safety and Industrial segment, which grew approximately 2.4% organically year over year in fourth-quarter 2024. The segment has been benefiting from persistent strength in the roofing granules and electrical markets. Significant orders for aluminum high-capacity conductors and power cable accessories in Asia and the United States, driven by an increase in demand from data centers, augur well for the segment in the quarters ahead.

The company’s Transportation and Electronics segment has been witnessing strength in the transportation and aerospace end markets. Solid electronics demand, backed by an increase in production volume by electronics original equipment manufacturer (OEM) customers, is proving beneficial for the segment. However, weakness in the automotive electrification market, due to a decline in automotive OEM build rates, remains a concern. The segment’s adjusted organic revenues grew 2% in the fourth quarter of 2024.

Backed by strength across its businesses, the company’s total adjusted organic revenues increased 2.1% to $5.8 billion in the fourth quarter. For 2025, it expects total adjusted organic revenues to grow 2-3% on a year-over-year basis.

3M has been undertaking several restructuring actions that include streamlining the geographic footprint, simplifying the supply chain and optimizing manufacturing roles to align with production volumes. In 2024, these actions, together with strong organic volume and productivity, boosted MMM’s adjusted operating margin by 280 basis points year over year to 21.4%. For 2025, the company expects the adjusted operating margin to increase in the band of 130-190 basis points year over year.

The company also remains focused on increasing shareholders’ wealth through dividend payments and share buybacks. In 2024, it paid dividends worth $2 billion and repurchased shares for $1.8 billion. Recently, MMM’s board also approved a share buyback program, authorizing it to repurchase up to $7.5 billion of common stock. In 2025, it anticipates a gross share repurchase of around $1.5 billion. Also, in February 2025, the company hiked its quarterly dividend by 4.3%.

3M’s Better-Than-Industry Returns

MMM’s trailing 12-month return on equity (ROE) is indicative of its growth potential. ROE for the trailing 12 months is 100.8%, much higher than the industry’s 44.29%. This reflects the company’s efficient usage of shareholder funds.

A Few Near-Term Concerns Prevail

Despite the aforementioned growth opportunities, 3M faces certain challenges that one should consider before investing in this stock. Weakness in the consumer retail end markets has been affecting the performance of the Consumer segment of late. The segment’s revenues declined 1.9% in 2024. There has been weakness in the packaging & expression, home & auto care and consumer safety and well-being businesses. It expects consumer retail discretionary spending on hardline goods to remain muted in the near term, which is likely to affect its performance.

MMM’s high debt level remains another concern for its profitability. Exiting the fourth-quarter 2024, the company’s long-term debt was $11.1 billion. Its short-term borrowings and current portion of long-term debt totaled $1.9 billion. Also, interest expenses in 2024 increased 26.5% year over year to $1.2 billion. It’s worth noting that 3M’s long-term debt-to-capital ratio is 74.1%, much higher than the industry’s 27.3%.

The company has also been subject to several litigations, including earplug lawsuits. It has committed substantial funds to resolve these disputes as ongoing litigation might lead to additional expenses. Per the terms of the Combat Arms Earplug settlement announced in August 2023, 3M agreed to pay a sum of $6 billion to resolve the litigation case over the period from 2023 to 2029.

Valuation Remains an Overhang for 3M

MMM is trading at a premium to industry peers with a forward 12-month price-to-earnings (P/E) multiple of 19.07X. The current valuation is above its five-year median of 15.05X and has surpassed the broader industry’s multiple of 16.39X. Also, the stock is overvalued compared with its peer, Griffon Corporation GFF, which is trading at 13.46X.

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MMM’s Downward Earnings Estimate Revisions

Earnings estimates for 3M have moved down over the past 30 days. Earnings estimates for first-quarter 2025 and 2025 have declined 13.8% and 0.5%, respectively.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

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Summing Up

Despite its several upsides and solid share price returns, the near-term challenges such as weakness in the retail market, high debt level and premium valuation are limiting this Zacks Rank #3 (Hold) company’s prospects. While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Honeywell International Inc. (HON) : Free Stock Analysis Report

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