3M (NYSE:MMM) has become a beacon of American industry in its 111 years of existence. The stock has long been considered a solid “buy and hold” and dividend play for investors. After announcing impressive second quarter earnings on Thursday, the company looks poised for continued earnings and revenue growth. Let’s use our CHEAT SHEET investing framework to decide whether 3M is an OUTPERFORM, WAIT AND SEE, or STAY AWAY.
C = Catalysts for the Stock’s Movement
3M announced stellar second quarter results on Thursday. The company reported earnings per share of $1.71 — beating analysts’ estimates of $1.70, and 3 percent higher than the previous year’s quarterly EPS. Additionally, sales rose across the board, with increasing revenue growth in the Health Care, Industrial, Consumer, and Safety and Graphics divisions. However, revenues from the Electronics and Energy division decreased on a year-over-year basis.
Most notable from the report was 3M’s substantial free cash flow of $1.285 billion. The company has a strong return on invested capital at 19.07 percent*, and has used its cash flow to fund several recent acquisitions and internal research and development. The company bought Ceradyne, an industrial ceramics and ballistics armor company, late last year. So far, the acquisition has proven successful: Ceradyne sales grew 4.6 percent year-over-year, adding to 3M’s Industrial division’s 6.6 percent revenue growth for the quarter.
*Statistic sourced from Morningstar