3M (NYSE: MMM) recently reported its Q4’24 results, with revenues and earnings beating the street estimates. The company reported adjusted revenue of $5.81 billion and earnings of $1.68 on a per-share and adjusted basis, compared to the consensus estimates of $5.78 billion and $1.66, respectively. Furthermore, the company’s outlook for 2025 was better than the expectations, and this boded well for its stock.
MMM stock, with 66% gains since the beginning of 2024, has outperformed the broader markets, with the S&P500 index up 27%. 3M on April 1, 2024, completed the planned spin-off of its health care business, which is now an independent company — Solventum – and this move was largely seen as a positive for the company and aided its stock price last year. But, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
3M’s revenue of $5.8 billion in Q4 was up 2.2% y-o-y. Transportation and Electronics segment sales were up 1.1%, Safety & Industrial revenue was up 1.6%, and the Consumer segment saw a 0.2% rise in sales. 3M’s sales growth has been tepid lately due to supply chain disruptions, high inflation, and a strengthening dollar. Its consumer business has also been facing headwinds amid lower home improvement, auto-care, and packaging demand. However, Q4 saw a positive sales growth and the company expects the sales to rise in 2025.
3M saw its adjusted EBITDA margin contract by 70 bps y-o-y to 24.5% in Q4. This led to a solid decline in the bottom line to $1.68 on an adjusted basis. Looking forward, 3M expects its full-year 2025 adjusted organic sales to rise as much as 3%, and its adjusted earnings per share to be in the range of $7.60 and $7.90. This compares with the street estimate of a low single-digit decline in sales and adjusted earnings estimate of $7.78 per share.
MMM stock popped 4% after an upbeat earnings and outlook. But, looking at a slightly longer period, the increase in MMM stock over the last four-year period has been far from consistent, with annual returns being more volatile than the S&P 500. Returns for the stock were 5% in 2021, -30% in 2022, -3% in 2023, and 46% in 2024.
The Trefis High Quality Portfolio, with a collection of 30 stocks, is much less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could MMM face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months — or will it see a strong jump? While we will soon update our model to reflect the latest earnings, MMM stock seems to have little room for growth, in our view. At its current levels of $147, MMM stock is already trading at 19x expected earnings of $7.75 per share in 2025 (at the mid-point of the guided range), versus its average P/S ratio of 17x over the last five years. Overall, we believe that 3M posted a solid Q4, but after its recent rally, its stock appears fully valued now, and investors willing to enter it will likely be better-off waiting for a dip.
While MMM stock looks like it is appropriately priced, it is helpful to see how 3M’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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