RBC: 3M Remains One Of The Strongest Industrials

3M Co MMM’s downslope over the past four months has created a potentially attractive entry point for what RBC Capital Markets views as one of the strongest multi-industry stocks.

The Analyst

RBC's Deane Dray upgraded 3M from Sector Perform to Outperform and lifted the stock’s price target from $227 to $238.

The Thesis

3M’s downslope in recent months has pushed shares below their historical relative P/E support level, providing an entry point for investors, Dray said in a Thursday note.

First-quarter earnings were a disappointment, but that was likely due to shorter-term weakness in end markets rather than widespread macro deterioration, the analyst said.

“From what we can gauge, the recent 1Q18 earnings pressure stemmed from familiar and contained end market-specific dynamics, including weakness in auto, dental and consumer electronics."

3M remains one of the strongest industrial names and achieves the highest operating margins and ROIC in the sector, Dray said.

“At this stage of the economic cycle, our bias is to recommend higher-quality names in our multi-industry coverage."