3M Posts Surprise 4Q Profit Amid Strong Demand For Face Masks

3M reported better-than-expected fourth quarter earnings results sending its shares up 3.3% on Jan. 26.

The N95 mask maker posted EPS of $2.38 in 4Q that beat analysts’ estimates of $2.14. Revenue grew 5.8% to $8.6 billion year-on-year, exceeding the Street consensus of $8.3 billion.

3M’s (MMM) CEO Mike Roman, said, “Throughout 2020 we distributed two billion respirators globally and supported the development and manufacturing of vaccines and therapeutics to help the world respond to COVID-19. We also took significant actions to transform and build 3M for the future, while advancing our core values.”

Furthermore, he said, “Moving forward we will continue to prioritize investments in growth, productivity and sustainability as we build on our progress and deliver strong results in 2021.”

Revenue growth in 4Q was driven by a 12.7% year-on-year growth in the company’s safety and industrial segment with sales of $3.1 billion. This segment includes sales of personal safety products and industrial adhesives and tapes. (See MMM stock analysis on TipRanks)

Another revenue growth driver in 4Q was the consumer segment with sales of $1.4 billion, up by 10.6% year-on-year. The consumer segment includes sales of home improvement and home care supplies.

Looking ahead, 3M expects sales in FY 2021 to grow in the range of 5% to 8% with organic revenue growth in the local currency expected to expand by 3% to 6%. EPS is forecasted at $9.20 to $9.70.

On Jan. 27, JP Morgan analyst Stephen Tusa upgraded the stock from Hold to Buy and raised the price target from $183 to $205. In October last year, Tusa had said that going into 2021, “the debate shifts to escape velocity on earnings, where there is risk given multiples that discount optimistic growth assumptions”.

Overall, Wall Street analysts are cautiously bearish about the stock and the consensus is a Moderate Sell with 4 analysts recommending a Hold and 3 analysts suggesting a Sell. The average price target of $177.71 implies 1% upside potential to current levels.

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