Should I Buy 3M (MMM)? Finance YouTuber Analysis

The YouTuber suggests avoiding 3M due to its sensitivity to economic downturns and the negative impact of tariffs. The company's recent earnings report showed weak organic growth, cautious consumer spending, and a significant tariff impact sensitivity of $0.20 to $0.40 per share in earnings, indicating broader economic headwinds.

“If 3M is going to have this much of an impact from tariffs, expect that a lot of companies are going to be much much higher than that, particularly in the consumer segment.”

The analyst advises avoiding 3M stock, arguing that the company has lost its competitive edge by focusing on efficiency rather than innovation and R&D, which historically drove its growth. He notes that organic growth is below inflation, margins are declining long-term, and the strategic position is poor, despite seemingly cheap valuation metrics. The company's current strategy is not expected to reverse these trends.

“I don't see any signs that that is going to turn around and 3M is going to be even outgrowing inflation over the next couple of years so that's why this is just a stock that I would stay away from.”

The analyst suggests avoiding 3M despite recent positive earnings and lawsuit settlements. He argues that the stock is not cheap enough given its low single-digit growth, trading at a P/E of around 17. He also notes that the company still struggles with organic growth and innovation, a long-standing issue, and needs to demonstrate a better balance between margin focus and R&D spending before it becomes an attractive investment.

“but that said it's not the kind of stock that I'm quite going to be buying yet because I don't see either a no-brainer value or the kind of organic growth that would deserve a little bit higher multiple in that High Teens low 20 times earnings multiple”

Travis Hoium argues that 3M is in a long-term decline due to a lack of investment in R&D and capital expenditures, leading to shrinking organic growth and deteriorating margins across all business segments. He believes the company's focus on short-term efficiency over innovation has eroded its competitive advantages and will prevent it from outperforming the market in the future.

“I don't think it will in the future as well.”

Travis Hoium argues that 3M's decline will continue despite a positive market reaction to recent earnings. He points to negative organic sales growth across most segments, which is being masked by cost-cutting measures like layoffs and reduced R&D, leading to higher margins and free cash flow at the expense of future growth and innovation. He believes the company is in a structural decline and is not investing in new products needed for long-term revenue expansion.

“3M is a company that's in Decline and I don't see that decline ending despite the fact that the market was pretty happy with results today.”

The YouTuber advises avoiding 3M stock despite its seemingly attractive valuation (P/E of 11, 5.6% dividend yield). He argues that the company is in a structural decline, with products being commoditized and a loss of supply power. Broad-based negative organic growth across most segments and a lack of innovation suggest it's not built for the 21st century, making the value a 'trap'.

“Does the stock look like a value today? Yes, but I think that value is really a trap for investors and so that's why I am staying out of 3M stock.”

The analyst advises avoiding 3M stock, citing three major red flags. Operating margins have been consistently declining since 2016, indicating a loss of pricing power. The company's R&D spending is no longer yielding innovative products, leading to stagnant revenue growth. Finally, the increasing dividend payout ratio, now above 75% of earnings, suggests the company is prioritizing shareholder returns over reinvestment and growth, which is unsustainable if earnings continue to decline.

“These are major red flags for the company and one of the reasons that I'm simply staying out of the stock.”

Travis Hoium argues that 3M is a value trap despite its high dividend yield. He points to a decade of underperformance against the S&P 500, stagnant revenue growth (less than 1% annually), declining gross profit margins, and a falling return on assets. He believes the company's intense focus on efficiency has stifled innovation, making a comeback unlikely.

“this may be one of those stocks that's more value trap than it is value right now”

The YouTuber argues that 3M, despite being a large brand, has underperformed the market over the last decade. This is attributed to the internet changing consumer demand and distribution, leading to increased competition from smaller brands and reduced pricing power for established players. He believes this trend will continue, making it a poor long-term investment.

“these phenomenal Brands the companies that own these brands have underperformed the stock market overall over the past decade why is that”

The analyst suggests avoiding 3M due to concerning operating trends, including declining revenue, non-existent organic growth, and drying up cash flow from operations. While the dividend isn't in immediate danger, the high dividend yield (6-7%) is seen as a warning sign that the market doubts its long-term sustainability, especially given the company's inability to grow its dividend or add value through organic growth or acquisitions.

“when a company like 3M starts having a dividend yield of six percent seven percent that should be a warning sign for you as an investor that the market doesn't think that this dividend is going to be sustainable”

The analyst suggests 3M is a value stock trading at a reasonable multiple in the low teens, based on its 2023 earnings guidance of $8.50 to $9.00 per share. Despite mixed earnings impacted by foreign exchange, raw material costs, and inventory reductions, the company offers a 5% dividend yield, making it an attractive long-term investment at its current price of $115 per share.

“The company's trading in a pretty reasonable multiple right now 2023 guidance is for eight dollars and fifty cents to nine dollars per share in earnings and I think you kind of alluded to it maybe that's going to be a low Point as we're recording the stock is trading for a 115 dollars per share so the multiple there is in the low teens I think it's a pretty reasonable multiple to pay for a company that's yielding five percent from a dividend perspective so this is a value stock It's Not Gonna Knock anybody's socks off with its with its earnings but if you're getting it for a good price I don't think that's a bad spot to be”

The analyst suggests 3M as a 'set it and forget it' stock, noting its current attractive valuation (10.5x P/E, 5% dividend yield) after a period of underperformance. They believe the trend of reshoring manufacturing will provide tailwinds, benefiting 3M's role as a critical component supplier with strong technology, despite its lower growth profile.

“another one to play on some of the mega Trends is 3M this is I worked at 3M 15 years ago for about seven years and what was interesting then was you could kind of see the slow deterioration of the business there was a lot of new new competitors coming from China and India but this was still a premium company making premium products having really good margins”

The YouTuber recommends 3M as a 'set it and forget it' dividend stock, citing its steady performance as a manufacturing company with a 4.7% dividend yield. The company is well-positioned for the trend of manufacturing moving back to the US, despite its significant international exposure. Its markets are also less prone to disruption, offering stability.

“but just a steady performer 4.7 percent dividend yield that's something that I think we can count on especially as we see more and more manufacturing moving back to the US.”

The YouTuber mentions 3M as part of his dividend portfolio, noting a dividend cut due to a spin-off (Solventum). He implies it's a current holding but doesn't suggest adding or selling.

“bei 3m gab es eine Kürzung tatsächlich aber das hat ja damit zu tun dass es eine abspallung gab auch mit solventum”

The YouTuber indicates that 3M was an attractive investment when its P/E ratio was extremely low, around 10-12, at the beginning of the year. He highlights that its P/E has since increased to 20, suggesting that buying at a low valuation was a successful strategy.

“3M wä ja auch noch ganz interessant die haben wir s ja auch relativ schlecht gelaufen eigentlich auf 5 Jahre und auch hier siehst du hier Anfang des Jahres noch extrem günstig gewesen hier mit 10 12 KGV und jetzt ein KGV von 20 3m”

The analyst suggests holding 3M, acknowledging its past significant decline due to legal liabilities and a spinoff. While the company is undergoing a turnaround with a new CEO and improving efficiency, the analyst remains skeptical about immediate strong earnings growth. A buy would only be considered if the stock drops back to a single-digit P/E ratio.

“Ich bin hier allerdings ein bisschen skeptischer jetzt bei 3m eingestellt weil es jetzt eher noch eine Turnaround Story die müssen das jetzt erstmal noch beweisen dass ich auch dieses Gewinnwachstum hier tatsächlich hinlegen können vielleicht läuft ja noch eine Weile hier so seitwärts wie wir es auch hier gesehen haben und dann würden sicherlich auch wieder Gewinne abgegeben werden wenn dann die Aktie wieder hier runterrutscht in so ein einstelliges KGV dann wäre es wieder natürlich interessant dann könnte man sich wieder überlegen die Aktie zuzulegen”

The analyst views 3M as a turnaround story, with the new CEO successfully improving operations and earnings. Despite a recent stock surge, the current valuation is near fair value, offering a 10% annual return expectation. He suggests buying in tranches.

“das heißt es wäre noch nicht zu spät für den Einstieg wenn man dran glaubt m genau aber auch hier würde ich eher so ähnlich wie bei philiip Morris eher in drchen kaufen”

The YouTuber suggests 3M was also bought when it was undervalued, similar to Unilever. They note that the stock initially continued to decline after their purchase but has since recovered, demonstrating the strategy of buying quality companies during periods of perceived weakness to benefit from eventual recovery.

“auch hier sieht man ganz klar hier die Unterbewertung auch hier wie bei un lever ging es er noch weiter Berg ab bis dann hier die Erholung kam aus diversen Gründen auf die wir jetzt nicht eingehen weil hier geht's ja ums allgemeine Prinzip”

The YouTuber is selling 3M due to ongoing legal liabilities and potential dividend cuts, which increase the risk profile of the stock. Additionally, the upcoming spin-off of its high-margin healthcare segment will weaken the remaining company's profitability and make it less attractive for a dividend growth strategy.

“ich auf jeden Fall will ich nicht diese Aktie haben sowohl im staddepot als auch im digidividendendepot weshalb ich mich von dieser Aktie trenne”

The analyst believes 3M's dividend is secure despite significant legal liabilities, as the company has sufficient cash reserves to cover potential shortfalls over the next six years. The stock is currently undervalued, trading at a high dividend yield of 6.1%, which suggests a significant upside potential as the market re-rates the stock once legal uncertainties subside. The current valuation offers a compelling entry point for long-term investors seeking dividend income and capital appreciation.

“In Summe die 3M Aktie wäre dann durchaus oder wenn man diese Annahmen für bare Münze nimmt und sich bewahrheiten sollte dann wäre die Akzept tatsächlich oder dann ist die Akzept tatsächlich attraktiv bewertet dadurch dass ich dann auch davon ausgehe dass sie die 3M Aktie wieder erholen wird und dann deutlich über 100 US-Dollar wieder kosten wird also um die 130 Ende 25 oder knapp 130 Ende 2024 hätte man dann auch als Aktionären hier bei einem Kauf einen einmaligen renditeboost durch Kurs aufholungspotenzial sozusagen”

The YouTuber includes 3M in a curated list of dividend stocks for a diversified portfolio. It is considered a solid dividend payer with a good dividend yield, fitting the criteria for quality and stability.

The YouTuber suggests buying 3M, noting its recent spin-off of the healthcare business as a catalyst for improved focus and profitability. While waiting for efficiency returns, investors can collect a nearly 7% dividend yield, supported by 64 consecutive years of increases.

“I've been following shares of 3M since October now up 24% as the stock took off ahead of that spin-off of the shares while you won't get those new shares of solvent with three of them now the the spin-off still leaves the parent company easier to manage and more focused that could translate to better profitability and returns for the stock.”

The YouTuber recommends 3M due to its upcoming spin-off of the healthcare business, Solventum, which is expected to unlock value similar to other conglomerates. He notes the company's 64-year dividend growth history, currently cheap valuation, and strong fundamental business case, suggesting investors can earn a nearly 6% dividend while waiting for share appreciation.

“We're coming up on the spin-off of 3m's healthcare business which could be a great Catalyst for the stock and it's 5.9% dividend.”

The YouTuber suggests 3M for its 6.6% dividend yield, viewing its 55% slump over three years as a special situation. He notes the planned tax-free spin-off of its healthcare business (Solventum) as a potential catalyst to unlock value, similar to other conglomerates. Despite slow sales growth, the company has increased its dividend for 64 straight years, offering a strong yield while investors await the spin-off and potential share price appreciation.

“You're going to earn that nearly 7% dividend while you wait for these shares to head higher.”

The YouTuber highlights 3M for its high dividend yield and potential for surprise upside. Despite a recent slump due to slowing sales and market sentiment against conglomerates, 3M is spinning off its healthcare business, which could unlock value in its remaining segments. The company has a long history of dividend increases, offering consistency while investors await the spin-off's impact.

“I do like 3M for a potential surprise upside that I'll tell you next and the consistency in the the dividends but it's definitely not the fastest growing dividend”

The analyst recommends 3M due to its upcoming healthcare spin-off, which is expected to unlock significant shareholder value by addressing the conglomerate discount. The spun-off healthcare segment could trade at a much higher valuation (e.g., 20x P/E) compared to 3M's current 10.4x P/E, potentially leading to a combined stock price 22% higher. This offers solid short-term upside in addition to its strong dividend.

“The idea here is that those earnings generated by the 3M Healthcare segment trade at a discount because it's locked inside the big unwieldy conglomerate but once the segment spins off and starts trading alone those earnings could start trading not at 10.4 times valuation but closer to that 20 times industry average.”

The analyst sees 3M as an interesting short-term and long-term opportunity, particularly due to the upcoming spin-off of its healthcare business. This spin-off is expected to unlock significant shareholder value by eliminating the 'conglomerate discount,' as the healthcare segment's earnings could be re-rated at a higher valuation once it trades independently. The analyst provides a detailed calculation showing potential upside from this event.

“The idea here is that the earnings generated by 3M Healthcare segment traded at a discount because it's locked inside this big unwieldy conglomerate and once that segment spins off though and starts trading alone those earnings could start trading not at that 11.3 times valuation but closer to 20 times”

The analyst recommends buying 3M shares, noting that negative news regarding inflation and a strong dollar is likely already priced into the stock, which trades at about 10 times earnings. He highlights the upcoming spin-off of its healthcare segment, suggesting that investors could benefit from receiving shares in the new company, similar to the positive performance seen with General Electric's spin-off.

“I think the shares are trading for about 10 times on the price to earnings basis ahead of out of the planned spin-off this year so shares of uh you know it is expected to spin off its Healthcare segment into a news company shareholders investors in 3M will get shares of that new company as it spins off later this year.”

The analyst suggests holding 3M for its dividend, but notes slow growth and litigation overhang will likely limit price appreciation for at least six months. However, he suggests considering buying before the healthcare spin-off in late 2023, as spin-offs often lead to outperformance.

“My Outlook on shares of 3Ms with that slow growth and the litigation overhang they probably don't do much for at least the next six months or more. It is a safe dividend but the dividend growth is going to slow to a crawl and the company really has no plan for a turnaround here.”

The YouTuber suggests 3M as an interesting opportunity despite recent legal issues, noting its current 5.5% dividend yield is near an all-time high. He highlights the company's steady revenue and earnings, and a low debt-to-EBITDA ratio of 1.3x, indicating its ability to sustain the dividend, offering an attractive risk-reward for income investors.

“The dividend yield itself... is up to an all-time high almost six percent dividend yield... revenue grows pretty steadily for this business... only 1.3 times earnings so they can afford the dividend.”