Investors who have been waiting for the turnaround of 3M Co. (NYSE: MMM) have been punished for years. That may now be all over. Or mostly over. And if Wall Street’s top cheerleaders are correct, 3M may have just become a massive buy for strategic investors seeking solid upside. Just don’t be too shocked if 3M gives back at least a little of the massive gains as profit taking and long-term disappointed holders may take some chips off the table.
A week ago marked the best single day gain for 3M in decades. One financial headline even said it was the stock’s greatest gain ever after 3M posted better-than-expected earnings. It even looks like growth is returning here after years of no real growth. 3M completed its Solventum Corporation (NYSE: SOLV) separation on April 1, making total comparisons feel a bit wonky.
Oggonomics does not generally report earnings details because they are covered in-depth elsewhere, but its earnings beat at $1.93 per share (versus $1.68 per share consensus estimate) and revenues of $6 billion (versus $5.9 billion consensus) was too big to ignore. If you adjust for the Solventum spin-off, then 3M’snumbers were $1.70 EPS and $5.7 billion in revenues.
Solventum is 3M’s health spin-off and this stock had been in the most hated members of the S&P 500 during the second quarter of 2024. It had traded as high as $70 shortly after its April trading debut and the stock was last seen down at $52.88 as the second half ended. Its screen is -23.3% YTD, but it’s down 24.5% from its peak.
3M’s stock reaction was a one-day gain of 23% to $127.16. That’s at least the largest one-day gain in over 40 years. Now Wall Street has jumped on the bandwagon. Back on May 10, 3M shares were formally raised to Buy from Hold with a price target of $115 (versus $97.33 prior close) at HSBC. The analyst community has responded with many such upgrades after the July 26 report:
- July 31 – 3M raised to Buy from Hold and its target was raised to $150 from $110 at Deutsche Bank.
- July 30 – Argus raised to Buy from Hold with a $145 price target.
And some analysts maintained their prior formal ratings but handily raised their target prices after the post-earnings adjustment:
- July 29 – Citi maintained Neutral rating but raised its target to $133 from $100.
- July 29 – Barclays reiterated its Overweight rating and raised its target to $145 from $120.
- July 29 – BofA reiterated its Buy rating and raised its price objective to $143 from $120.
- July 29 – RBC reiterated its Underperform rating, but still raised its target to $95 from $93.
Prior to the report, some other upgrades had also been seen that overlap with coverage stated above:
- BofA raised its rating to Buy from Neutral and set a $120 price objective on June 7.
- Wolfe Research raised 3M to Outperform from Perform with a $125 target on June 13.
Shares of 3M were last seen trading at $126.75 on the third day of its massive gap-up. It would not be surprising to see the shares give back some of the gains after such a sharp surge. That said, it’s would probably take a significant stock market pullback or an unknown event to take the shares back to under $105 where it had been before the earnings report. The stock had traded briefly under $115 in the initial response on Jul26, and most Oggonomics who use charts probably won’t expect that to be seen again — assuming they are right that 3M’s turnaround is finally here.
The last time 3M shares had traded above $120 was back in early 2022.
