Shares in industrial giant 3M (NYSE: MMM) increased by almost 10% in the week to Friday morning, according to data provided by S&P Global Market Intelligence. The move comes down to a combination of a well-received presentation at the J.P. Morgan Industrials Conference on Wednesday and an update on the CEO succession on Tuesday.
3M changes its CEO
Given that 3M’s share price is down almost 48% since Mike Roman took over as CEO in July 2018 it’s fair to say his tenure hasn’t been a success. However, with former L3Harris Technologies chairman William Brown taking over on May 1, investors have a reason for optimism that a change in strategy could be imminent. That said, Roman will take over as executive chairman at that time, and 3M has waived the mandatory retirement age of 65 years for both men in their 60s.
3M’s presentation at the J.P. Morgan Conference
The headline from the presentation is that Roman raised the company’s first-quarter earnings-per-share guidance from between $2 and $2.15 to a new range of $2.05 to $2.20. However, the $0.05 only comes from “the interest on the Solventum debt raise,” according to Roman. As a reminder, Solventum is the healthcare business 3M is set to spin off on April 1.
On a more positive note, CFO Monish Patolawala told investors 3M’s annualized stranded costs (due to the Solventum spinoff) would be in the $150 million to $175 million range compared to an initial estimate of $350 million to $500 million. That could lead to analysts upgrading their models for ongoing profitability at 3M.
3M definitely has attractions as a value play; however, suppose you are considering buying 3M for its 5.9% yield. In that case, it pays to listen to what Roman said in response to a question on the dividend. He once again fell short of definitively affirming it would be maintained at the current level. According to Roman, 3M prioritizes investing in the business before returning capital to investors, including “an attractive dividend.”
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends 3M. The Motley Fool has a disclosure policy.
Why Shares in 3M Rose This Week was originally published by The Motley Fool
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