Mask-Maker 3M Shares Gain as Earnings Top Estimates; Target Price $194 in Best Case

Maplewood-based company 3M, which manufactures N95 face masks, reported better-than-expected earnings in the fourth quarter of 2020 as the company saw sequential improvements in demand for its healthcare products during the coronavirus pandemic, sending its shares up about 3% on Tuesday.

The U.S. technology company said its sales grew 5.8% year-on-year to $8.6 billion. Organic local-currency sales increased by 5.5% while acquisitions, net of divestitures, decreased sales by 1.1%. Total sales grew 12.7% in safety and industrial, 10.6% in consumer, 5.4% in health care, and 2.3% in transportation and electronics.

The maker of N95 masks reported its both fourth-quarter GAAP and adjusted earnings were $2.38 per share, resulting in year-on-year increases of 43.4% and 22.1% on a GAAP-and adjusted-basis, respectively.  That was higher than the Wall Street consensus estimate of $2.38 per share.

3M forecasts its full-year 2021 earnings to be in the range of $9.20 to $9.70 per share. The company expects its full-year total sales growth in the range of 5 to 8% with organic local-currency growth between 3 to 6%. The mask-maker also forecasts its full-year free cash flow conversion to be in the range of 95 to 105%.

Following this upbeat outlook, 3M shares rose about 3% higher to $175.39 on Tuesday. However, the stock fell 1% in 2020.

3M Co Stock Price Forecast

Seven analysts who offered stock ratings for 3M Co in the last three months forecast the average price in 12 months at $177.71 with a high forecast of $194.00 and a low forecast of $150.00.

The average price target represents a 1.26% increase from the last price of $175.50. From those seven analysts, none rated “Buy”, four rated “Hold” and three rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $188 with a high of $214 under a bull scenario and $144 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the technology company’s stock.

Several other analysts have also recently commented on the stock. UBS raised the price target to $158 from $150. Deutsche Bank upped the price objective to $190 from $187. Credit Suisse Group increased their price objective on 3M to $197 from $179 and gave the stock an “outperform” rating. BidaskClub cut 3M from a “buy” rating to a “hold” rating.

Analyst Comments

“We view 3M’s (MMM) COVID-19 disruption to be slightly more impactful than the average company in our group given their cyclical end markets. We expect growth to normalize in 2021, but with significant disruptions to revenue in the short-term,” said Joshua Pokrzywinski, equity analyst at Morgan Stanley.

“We expect MMM to see organic growth declines for 2020 as select end markets, particularly cyclical markets like Auto, Industrial, and certain parts of Electrical remain challenged. While we had been wary of extended valuations at the beginning of the year, the pullback looks more in-line with historical levels to us.”

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