A New Look At Old Names- 3M, DuPont And Johnson & Johnson

Face Mask, Covid-19, Epidemic, Wuhan''S Virus

3M (MMM), DuPont (DD), and Johnson & Johnson (JNJ) are “old” names on the cusp of rebirths; their fundamental stories are improving, yields are tasty, and total returns should outpace the broad market this year.

3M

Admittedly, I was a bit surprised to find myself drawn to 3M. The stock really has not done much of anything in the last five years, the stock following a similar sluggish pattern of the company’s revenue line. However, there seems to be something stirring this behemoth.

For starters, the company’s vast operations represent a pretty good proxy for the overall economy, which means 3M’s prospects should improve as the “economic reopening” theme gains traction.

Second, cash flow trends have been very positive for the company. Improving cash flow provides ammunition for dividend increases, needle-moving acquisitions, and debt reduction.

Third, the company seems to be building operating momentum. Per-share profits in the fourth quarter of $2.38 handily beat the consensus analysts’ estimate of $2.15. Organic sales rose 5.5% during the quarter. The company saw across-the-board sales strength in segments and regions in the quarter.

Total sales grew 12.7% in Safety and Industrial, 10.6% in Consumer, 5.4% in Health Care, and 2.3% in Transportation and Electronics. Organic local-currency sales grew 7.9% in the Americas, 5.6% in Europe/Middle East/Africa, and 1.7% in Asia Pacific. Adjusted free cash flow was up 16% in the quarter. 3M is looking to build on the momentum in 2021.

The firm expects 5% to 8% total sales growth, organic sales growth of 3% to 6%, and per-share profits of $9.20 to $9.70 for 2021. The firm had profits of $8.74 in 2020. 3M recently raised its dividend nearly 1% to a quarterly rate of $1.48 per share.

I was a little disappointed in the magnitude of the hike, though the company is probably being conservative given the still-uncertain business conditions that linger with the pandemic. The dividend hike represents the 63rd consecutive year that 3M has increased its dividend. Yielding 3.4%, 3M offers an intriguing total-return package for 2021.

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Gus B. 4 weeks ago Member's comment

I believe in $DD!

Roger Keats 1 month ago Member's comment

👍