3M's a Buy Ahead of Second-Quarter Earnings
3M (MMM) - Get Report will report second-quarter fiscal 2016 earnings results before Tuesday's opening bell. Technical analysis shows the stock is rising. So you either buy the stock now or risk paying a higher price later.
Shares of the Minnesota-based industrial conglomerate have already gone on a strong run, rising about 10% over the past month since falling to a June low of $165. But there's still a ton of value, despite its shares reaching all-time highs at around $182. The chart below, courtesy of TradingView, suggests MMM stock is now heading to $200, yielding additional premiums of around 8% to 11%.
MMM stock closed Friday at $180.44, up 0.10%. The stock, which is up some 20% year to date, against a 6% rise in the S&P 500 (SPX) , has doubled the 10% gains in the The Industrial Select Sector SPDR Fund (XLI) - Get Report and now rests about 2.5% above its consensus price target of $176. But MMM's going higher from here.
You can see from the chart, from around mid April to the end of June, MMM spent almost three months consolidating between $165 and $170. And during those past three months, MMM's 20-day average (blue line) and the 50-day average (pink line) crossed paths at around $168 on June 14, indicating that buying interest had somewhat leveled off, creating a solid base of support at around $168. Meanwhile, the XLI climbed some 5%, outperforming MMM.
In recent weeks, MMM finally broke above that $168 threshold, taking out resistance above $175. You can thank the post-Brexit rally for that. Assuming an earnings beat Tuesday and solid guidance, analysts will have no choice but to revise their estimates higher, which means raising their price targets.
The bet is, consensus price-target reaches $200 in the next six to twelve months, coinciding with MMM's technical metrics, which also point to $200. That suggests an 11% gain from current levels. The technicals say it will get there before the analysts realize it belongs there.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.