Despite its arguably undeserved (or at least exaggerated) reputation as a “defensive growth” name, 3M (MMM)
actually has a history of being one of the most sensitive names to
turns in the cycle – 3M tends to see the downturn before others, and
likewise tends to see the recovery. While the good news in that is that
3M may already be about halfway through the downturn (if this cycle
matches past cycles), the bad news is that there are a lot of bigger
challenges for 3M beyond the cycle.
Environmental
liability is going to capture a lot of attention in the near-term, but
I’m more bothered by the company’s troubling lack of margin leverage and
recent capital allocation decisions as they pertain to M&A. 3M
isn’t a bad business, and it’s not un-fixable, but it’s going to take
work to fix, and the apparent returns aren’t all that exciting in that
context.
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The Cycle Is Probably The Least Of 3M's Worries Now