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3M Stock Is Likely to Perform Better in 2019

GE stock

3M (NYSE: MMM) stock price traded in a narrow range after fumbling from over $200 level at the end of the first quarter. The company experienced pressure on share price due to a considerable decline in financial numbers. The gloomy global economy and trade war tensions impacted its financial numbers.

MMM shares are trading around $180 at present, down 7% in fiscal 2019. The company missed earnings estimates for the third quarter; it has also reduced outlook for the final quarter and fiscal 2019. 3M is a diversified industrial company. Its business model is directly correlated to global economic environment, manufacturing and construction activities.

Bleak Financial Numbers Impacted 3M Stock    

The company reported third-quarter sales of $8 billion, down 2% from the year-ago period. Besides healthcare segment, it’s all other business segments experienced a significant decline in sales. The company blamed microenvironment uncertainties for lower sales.

M Stock Is Likely...

On the positive side, the management has successfully tuned the negative sales growth into positive earnings. Its earnings per share grew 5.4% year over year in the latest quarter, thanks to strong operational efficiencies and share buybacks.

The CEO said, “While the macroeconomic environment remains challenging, we executed well and built on the progress we made in the second quarter. We continued to effectively manage costs and reduce inventory levels, while generating strong margins and cash flow.”

Dividend and Positive Economic Outlook Could Support 3M Shares

Although its sales fumbled in the past few quarters, the company appears in a strong position to enhance cash returns. Its dividends are safe amid strong cash generation. Indeed, the cash flows are offering a room for share buybacks and investments in growth opportunities.

M Stock Is Likely...

The company has repurchased $1 billion of common stock in the last three quarters. The share buybacks always support dividends and earnings. Analysts are expecting mid-single-digit dividend growth in 2020. In addition, the economic environment is improving after trade war agreement between the two largest economies.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.