Stock of the Day
|
3M Co (MMM)
Low Sales & High Costs Pare Down 3M Profits
Dow Jones Industrial Average component company 3M lost 8.22% of its stock price value in afternoon trading after the company announced it will see reduced second-quarter results. The company has experienced trouble in moving its increased inventories of LCD TVs, and it is trying to weather higher costs in developing its optical film manufacturing business. In spite of these troubles, analysts from UBS, Prudential, and JP Morgan are suggesting that investors hold the stock and possibly buy in. It turns out that 3M's estimated market share and position could make the global manufacturing company a solid bargain after this price correction.
|
| Daily Chart |
If you are not able to see the chart, your email client probably does not support javascript. To view it, please click here
|
| Stock Analysis |
3M Co, is a $21 bn diversified technology company that has been a pioneer in optical films that enhance brightness and visibility, since the 1930s. Recently, their multilayer optical films are meant to enhance the brightness of computer screens, LCD TVs, and handheld devices, but the research and development into this new technology requires the skills and tools to see and manipulate materials at near atom-sized scales. Commercializing this technology may not have been such a small task given that the Display and Graphics segment is the company's third largest in sales.
|
Increased development and rollout expenses may put a squeeze on corporate profits, as reduced sales also strain the business. While the company is estimated to control 75% of the market share for LCD screens, CEO George Buckley says that the industry as a whole overestimated demand for LCDs for the World Cup. Whatever the reason, it appears that inventories of LCD Screens are swelling with nowhere to go just yet.
|
3M projects annual earnings of $4.55 to $4.65 per share -- short of an expected $4.66 per share. But analysts advise that the company's fundamentals are still sound. One analyst with JP Morgan said that the snag in 3M's growth appears to be a one-quarter event, but the big picture may not be so rosy. If interest rates rise, and if gas become more expensive, consumers may become increasingly strapped for credit and for cash. This news may mean trouble for 3M (and many other companies), depending on its product mix.
|
August may bring more news about the Fed's position on interest rates, but in the meantime, UBS, JP Morgan, and Prudential maintain positive outlooks for the stock. UBS holds its projected $102 per share price target for the company, JP Morgan maintains that things will improve, and an analyst from Prudential said the price drop was an opportunity to get the stock at a bargain.
|
Profile |
The Company's principal activities are the research, manufacture and marketing of products for health care; industrial; display and graphics; consumer and office; safety, security and protection services; electronics, telecommunications and electrical; and transportation markets. These products include medical and surgical supplies, pressure-sensitive tapes, coated and non-woven abrasives, optical film and lens solutions, touch screens and touch monitors, stationery products, construction and home care products, respiratory protection products, safety and security products, electronic and interconnect solutions. On 02-Feb-2004, the Company acquired HighJump Software Inc., Hornell International on 02-Mar-2004 and on 02-Aug-2004, acquired Info-X Inc. The Company has operations in Europe, the Middle East, Asia Pacific, Latin America, Africa and Canada.
|
|
|
|
|
