3M (MMM) Stock Closes Higher on $2.5 Billion Deal to Buy KKR's Capital Safety

NEW YORK (TheStreet) -- Shares of 3M (MMM) closed up 0.1% to $159.84 on Tuesday after the technology company said it will acquire Capital Safety from private equity firm KKR & Co. (KKR) for $2.5 billion, according to Reuters.

Capital Safety, a provider of fall protection equipment, sells harness, lanyards and other gear for workers in construction, mining and other industrial sectors.

"Personal safety is a large and strategically important growth business in the 3M portfolio," 3M CEO Inge G. Thulin said.

Acquiring Capital Safety will help 3M's Personal Safety business, which is a provider of respiratory and hearing protection solutions that help improve the safety and security of workers, the companies stated.

Additionally, demand for safety equipment is growing quickly, especially in emerging markets as worker-protection regulations increase and multinational companies grown, Bloomberg noted.

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 solid stock price performance, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.47, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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.
  • The gross profit margin for 3M CO is rather high; currently it is at 54.05%. It has increased from the same quarter the previous year.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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's earnings per share improvement from the most recent quarter was slightly positive. 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 $7.49 versus $6.72 in the prior year. This year, the market expects an improvement in earnings ($7.90 versus $7.49).
  • You can view the full analysis from the report here: MMM Ratings Report

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