NEW YORK (TheStreet) -- Shares of 3M Co. (MMM) are slightly lower at $166.65 in pre-market trading after Langenberg & Co. downgraded the company to "hold" from "buy" while raising its price target to $170 from $160.
"3M has upped its game over the past 2 to 3 years and remains well on track to achieve its 2013 to 2017 objectives of 4% to 6% core revenue growth, EPS 9% to 11% per annum, ROIC 20% plus and 100% FCF conversation," analysts said.
In terms of guidance, 2015 was initiated at $8 to $8.30 on 3% to 6% core sales growth and 2% to 3% FX headwind. Langenberg & Co. estimates 2014 upward to $1.79 from $1.77 and 2015 at $8.20.
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"We love the company, but paying 20X forward EPS for a specialty chemical company is tough for us. An upside case can be made given the strong intellectual property and potential benefits of boosting R&D spending to 6% of sales from 5.6% over the coming years," analysts noted.
Overall, analysts said 3M was a "great story, fully reflected in [its] stock price."
Separately, TheStreet Ratings team rates 3M CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate 3M CO (MMM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MMM's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 2.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 3M CO has improved earnings per share by 11.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, 3M CO increased its bottom line by earning $6.72 versus $6.31 in the prior year. This year, the market expects an improvement in earnings ($7.48 versus $6.72).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Industrial Conglomerates industry average. The net income increased by 5.9% when compared to the same quarter one year prior, going from $1,230.00 million to $1,303.00 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Industrial Conglomerates industry and the overall market, 3M CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MMM Ratings Report