3M Co. - Stocks

Instrument description

The world we live in is driven by fast-moving consumer goods that are part of our daily lives and help to ease and fulfill the numerous tasks. There are many multinational companies that study the particular needs of the consumers and then produce goods and services to satisfy thos needs effectively. Minnesota Mining and Manufacturing, popularly known as 3M, is a conglomerate corporation that produces over 60,000 products such as adhesive tapes, medical and dental products, audio and visual equipment, Post-it notes, reflective coatings, and Microflex circuits.

3M recorded revenue worth over $32 billion in 2019 from sales due to its thousands of different products in various segments of the market, which includes Electronics and Energy, Consumer Goods, Healthcare, Safety and Graphics, and Industrial. 3M is arguably one of the most prominent company that extensively covers diverse segments of the market. 3M caters to a wide variety of end-user, from general consumers to a wide range of retailers, wholesalers, and distributors.

3M ranked 95 in the Fortune-500 list of 2019 and has operations in 70 countries of the world. 3M is a technology-driven company and constantly strives to make innovative and quality products for consumers. 3M is said to have invested over $3.5 billion in Research and Development in 2019.

History of 3M

3M started as a mining project in 1902 between five businessmen (John Dwan, Henry S. Bryan, William A. McGonagle, J. Danley Budd, and Hermon W. Cable) in Two Harbors, Minnesota and the purpose was to mine corundum, but 3 years later the company moved to Duluth to try to make sandpaper products. The company is currently located in St. Paul, Minnesota.

The big break came in 1925 when the popular adhesive tape we see and use today ‘Scotch tape’ was developed and sold. In the late 1950s, 3M made another breakthrough by introducing the first asthma inhaler, but the company did not start its pharmaceutical business. 3M is listed in the New York Stock Exchange (NYSE) since 1946, and in 1976 the company was also included among the 30 companies in the Dow Jones Industrial Average.

Current Business and Investment of 3M

3M has shown tremendous ability to manage the most diverse portfolio of products and projects, which is not easy for any business company as there are always challenges and setbacks. The multiple product lines have allowed 3M to maintain its market share and also spend in research for the development of innovative products. As the company deals with thousands of major and minor products, it is best to divide the products according to market segments which are as follows

• Healthcare

The healthcare products produced by 3M includes teeth whiteners, inhalers, surgical drapes, skin cleansers, stethoscopes, and antiseptic foams. The healthcare segment contributed to 23% of the total sales of 3M in 2019

• Electronics and Automotive Industry

3M knows how to add value to the already available consumer products, such as 3M, does not produce computer screens, but does provide protective screens and also offers flexible circuits for printer cartridges. 3M manufacturers 25% of the pressure-sensitive tape used in the overall American market. The company also makes power cables and a variety of automotive products. The electronics and industrial products constitute 30% of the total net sales for the company.

• Consumer Goods

The consumer goods segment comprises of many minor and major components and tools such as sponges, post-it notes, air conditioner filters, bandages, shower pads, snow boots, household swabs, steel skirting, and winter coats. But apart from the range of products, the consumer section only accounted for 16% in the overall sales in 2019.

• Safety and Industrial goods

The safety and industrial department is the leading segment of 3M that dwarfs all the other operations. There are hundreds of different 3M industrial holdings, and it is impossible to list all of them. The products in this section consist of switch spacers, cardio machine keypads, soundproofing instruments, and reflective sheeting. The safety and industrial segment accounted for more than 31% of the total sales in 2019.

Risk and Potential in 3M Business Environment

The numerous business offerings of 3M are both an advantage and challenge for the company, which has reduced is product lines from 40 to 23 and also in 2018 sold its communication division to ensure further clarity and efficiency in business. From an investor’s perspective, the company will keep on making changes and adjustments according to market dynamics. The future financial goal of 3M is to grow earnings per share (EPS) from 8% to 11% and organic sales growth from 3% to 5%.

The current Covid-19 pandemic has impacted nearly every business company big and small, but the diversity of business has allowed 3M to stay functional, as the company has doubled the production of specialized N-95 masks and now nearly 1.1 billion masks are produced in 3M facilities in United States, Asia, and Europe. 3M is expected to even double the current rate of production to 2 billion by 2023 and is also collaborating with other companies to design and deliver innovative healthcare products, particularly for nurses, doctors, and first responders.

The SWOT analysis is one of the best tools used to determine the situational strengths, weaknesses, opportunities, and threats of any business company. The SWOT analysis of 3M is done among all of its functions, which include finance, marketing, production, information systems, and strategic planning departments.

• Strengths

The strengths of 3M lie in its diversity and innovation in products and the ability to deliver big and small products in every popular segment of the market. The company is financially strong and stable and has a global reach with operations in more than 70 countries.

• Weaknesses

The weaknesses of the company are patent and damages cases and fighting a legal battle. The company also has to maintain a stream of investments to maintain its research and innovation.

• Opportunities

The global crisis, such as Covid-19, is serving a blessing for a company such as 3M that has doubled its production of N-95 masks. The company is also looking to gain revenue through acquisitions and managing the entire value chain on its own. 3M also looks to expand in similar areas of interest, such as renewable energy resources, lighting, and architecture.

• Threats

The biggest threat to 3M is the sudden and big fluctuations in the price of raw materials, which directly impacts the total production costs. The fluctuating currency rates are also seen as a threat, along with low-cost manufacturers. Another threat to the company is future results getting affected by legal and regulatory proceedings.

Stock Analysis of 3M

As 3M is a global brand, its stock are exchanged on all the major Stock Exchanges in the countries that the company operates in. The trade is only done when a buyer and seller agree on the price of the order. The data points that traders need to make a decision can be noted through a stock quote from a price chart of a particular stock. The key information that a trader needs to know to determine the price change are

• The company’s ticker number
• Security of interest
• The Bid and Ask price
• The number of shares that a trader can buy or sell

The ticker symbol for 3M is MMM. In the 2nd quarter of 2020 share price of 3M in NYSE is $158.32, with a market capitalization of $91.071 billion. The EPS stands at $8.52, and Yield is 3.73%. The bid price is 158.32 x 800, and the ask price is 158.38 x 1000, where (800) and (1000) shows the number of shares that are available for trading. The prices of stocks are determined by changes in supply and demand.

There is a significant downward trend in the first three months of operations, as presented in the 2nd quarterly report of 2020. There is a 20% drop in sales in the USA and a 15% drop from the Middle East, Europe, and the African region. The company predicted a much sharper decline at the end of the second quarter due to declining sales in key business locations.

But the fortune is favoring 3M as the company is the global leader when it comes to providing the authentic N-95 masks that are most valuable in preventing the coronavirus from spreading. 3M got two huge contracts from the US government to increase the production of masks from 35 million to 95 million units per month. The US administration also halted the exports of masks to cater to the domestic need for masks. But 3M said that it would increase the production of masks instead of stopping the exports.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.