Thursday, September 20, 2018

The Cycle Weighing A Bit On 3M

Shorter-cycle names have done a little better in recent months, but overall it’s been a challenging year for the stocks of companies like 3M (MMM), Illinois Tool Works (ITW), and Colfax (CFX) compared to Emerson (EMR), Honeywell (HON), and Eaton (ETN). The late summer/early fall is a popular time for sell-side conferences and investor days, and with that another chance to look at these names heading into the last three months of the year. In the case of 3M, it looks like the company’s shorter-cycle exposure is weighing a bit more on results, with management nudging down growth expectations while also experiencing higher cost inflation.

All told, 3M remains a well-run company at a somewhat challenging point in the cycle and with a tough valuation. 3M has a lot to offer as a flight-to-quality name and the company’s strong tradition of innovation and reinvestment supports a longer-term investment case, but unless management offers an uncommonly bullish outlook at its November investor meeting, investors are likely looking at middling near-term performance prospects.

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The Cycle Weighing A Bit On 3M

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