Reduced Top-Line Guidance Punishes 3M Shares
Nothing in wide-moat 3M’s first-quarter results alters our long-term view of the stock, and we are maintaining our $197 fair value estimate. As of this writing, the shares have fallen more than 7% after the earnings release. We think the reaction by the market was a result of two items: (1) 3M’s reduction to the upper tier of its organic local-currency sales growth guidance (updated guidance is 3%-4%, from 3%-5% previously) and (2) a $217 million tax expense related to the Tax Cuts and Jobs Act....3M is a technology company. The company has four segments: Safety and Industrial, which consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules; Transportation and Electronics, which consists of electronics, automotive and aerospace, commercial solutions, advanced materials, and transportation safety; Health Care, which includes medical solutions, oral care, separation and purification sciences, health information systems, drug delivery systems, and food safety; and Consumer, which consists of home improvement, stationery and office supplies, home care, and consumer health care.
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