Why JPMorgan Says 3M's Valuation Is Attractive

The risks from PFAS chemicals are already reflected in 3M Co’s MMM stock, and the company achieving “a level of sustainable earnings” supports upside, according to JPMorgan.

The 3M Analyst: Stephen Tusa upgraded 3M from Neutral to Overweight and raised the price target from $183 to $205.

The 3M Thesis: 3M's sales guidance appears “reasonable,” and “assuming the restructuring dynamics through FY22, which should be more clean with potential for inflection, we think consensus is doable, on which the stock is cheap,” Tusa said in the upgrade note.

The analyst compared 3M to General Electric Company GE, highlighting that they have the same market capitalization, the analyst said — although 3M’s current free cash flows are at $6 billion versus General Electric’s zero.

Moreover, 3M is paying out $4 billion to its shareholders, while General Electric’s payout is a negative dividend of $2 billion, he said.

“3M is a pretty solid early cyclical and a relative safety stock mid cycle, as long as it’s attractively valued, with fundamental metrics over a cycle that don’t support this extreme of a discount (to peers).”  

MMM Price Action: Shares of 3M were trading 4.56% higher to $183.98 at last check Wednesday.