3M Running Lukewarm-To-Cool, But The Turn Should Be Coming

It’s still a challenging time to be an industrial company. While the early consensus does seem to be that the second-half rebound story is still in play, it’s sounding more and more like the magnitude of that rebound is going to be less than hoped and the first half of 2020 is likewise going to be tougher than expected. In that respect, then, 3M’s (MMM) fourth quarter results and 2020 guidance don’t appear all that unusual.

I still have very mixed feelings about 3M. The company has frittered away a lot of balance sheet optionality on questionable M&A (and arguably oversized buybacks), and I think the latest restructuring effort (we seem to be averaging one a year now) falls short of the more radical change the business needs. On the other hand, 3M’s high R&D spending establishes high walls around a lot of its businesses and all but ensures healthy margins and cash flows. I’d very much like to see a deeper “re-think” of what 3M should look like 10 years from now, but the valuation today is not demanding and business conditions should improve from here.

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3M Running Lukewarm-To-Cool, But The Turn Should Be Coming