https://www.startribune.com/3ms-long-tenure-on-the-dow-index-may-be-in-jeopardy/600272610/
9 replies (most recent on top)
- 3M's perfect storm of business risks
3M faces a difficult year ahead. The sector-crossing giant of healthcare, consumer goods, industrial materials, and worker safety equipment is navigating through a perfect storm of business risks -- some from global market conditions and others of the company's own making.
Some stock price discounts can be a go-ahead signal to pick up shares of a high-quality company at a low price. Unfortunately, I don't see a wide-open buying window for 3M today. The company is up against too many game-changing challenges all at once, including:
Challenging financials: 3M's financial expectations for 2023 show a decrease in sales growth and lower earnings per share than market analysts predicted. This might raise concerns about the company's ability to maintain its six-decade streak of uninterrupted annual dividend increases.
Litigation issues: 3M is dealing with several legal battles, including those related to PFAS (a fluoride-based group of artificial chemicals used for waterproofing, protective coating, and more) and ear protection litigation. These lawsuits cost the company over $1 billion in 2021 and 2022, and the expenses are likely to continue.
Restructuring and divestitures: The company plans to spin off its healthcare business and is also discontinuing PFAS manufacturing by the end of 2025. Though these decisions may be good for 3M and shareholders in the long run, they could also result in more pretax charges and expenses, adding more uncertainty to the company's more immediate financial outlook.
Stock valuation: Although 3M currently trades at a modest 10 times adjusted earnings, its free cash flow multiple is a staggering 118 times. In other words, 3M looks affordable in relation to its solid after-tax income but expensive in light of its dwindling cash profits. The stock's true value is up in the air until 3M can settle its financial struggles.
Potential dividend risk: Given the many headwinds 3M is tackling simultaneously, investors worry that the company's long streak of annual dividend increases may come to an end. In fact, 3M may have to reduce or even halt its dividend payments, using the cash to shore up other leaks in the business structure instead. For those relying on dividends for income, this risk could be especially disturbing. Many investors flock to 3M's generous payouts, after all. At the moment, you're looking at a massive annual dividend yield of 5.9%.
So 3M's stock is quite cheap, in a certain angle and a certain light, but arguably for good reasons. This is one dog of the Dow I wouldn't recommend adopting today.
Can some kind soul post the full article from Startribune? Thanks
It has been a long time coming - not really if any more but when…
https://www.fool.com/investing/2023/03/29/is-it-time-to-buy-these-dogs-of-the-dow-in-2023/
Winning all over the place!
Kinda makes one wonder if our Sr Leaders have Put options on the 3M stock!
GE (3M management's favorite company since 2000) and Dupont both got kicked out. For the same reason 3M will be - lousy management and breaking the company into pieces to satisfy Wall Streets BS line of "unleash shareholder value."
Mike is pushing up against an age limit for 3M CEO anyway. He's out and Vale is in by January 1st.
What a tire fire this company has become :<(
Another feather in Mike's cap.
It is only a matter of time. The only surprise is that it had stayed so long even after a consistent abysmal performance since 2018.
This might be the only thing that could get the board to dump Mike.