JPMorgan has upgraded 3M to ‘overweight’ and raised its price target to $180 ahead of the company’s second-quarter earnings report, citing growing demand from AI and data centers. The bank anticipates that strength in semiconductor-related sales will offset weaknesses in consumer electronics and auto sectors.
Analyst Chigusa Katoku noted that U.S. consumer resilience and 3M’s pricing power could further boost profit margins as inflation declines.
JPMorgan Bullish on 3M Ahead of Earnings, Cites AI Demand
By Liz Napolitano
July 18, 2024
JPMorgan has upgraded Dow Jones Industrial Average component 3M to 'overweight' from 'neutral,' expressing optimism ahead of the industrial giant's second-quarter earnings report. The bank also raised its price target for the stock to $180 from $178, indicating an 11% potential upside from Thursday's closing price.
3M's headquarters in St. Paul, Minnesota. (Getty Images)
Analyst Chigusa Katoku noted that growth is taking hold at 3M, driven by broadening demand related to artificial intelligence and data centers across various economic sectors. "We see growth taking hold at 3M, which is required to drive the next leg of EPS growth, with short-cycle indicators continuing to be supportive and AI/datacenter driven demand broadening out into parts of the economy outside of the obvious beneficiaries," Katoku wrote in a note.
3M is scheduled to release its second-quarter financial results on Tuesday. JPMorgan's earnings per share expectation for the quarter is slightly higher than the consensus, at $2.26 per share compared to the Street's estimate of $2.24 per share.
Katoku highlighted that sales in data center and semiconductor-related areas have effectively offset weaker performance in consumer electronics and automotive sectors. She also pointed out that U.S. consumers continue to purchase 3M's standard products, with the potential for increased profit margins as inflation moderates. "Consumer electronics and auto softness...is offset by strength in datacenter/semi, and 3M's efforts to gain penetration in mainstream markets [are] taking hold, while [the] US consumer has been resilient," the analyst stated. "We see pricing take hold, which we think 3M can hold onto even as inflation comes down."
Analyst sentiment on 3M is divided, with nine analysts rating the stock a 'buy' or 'strong buy,' eight assigning a 'hold' rating, and two recommending 'underperform' or 'sell,' according to LSEG data.
Subscribe to our newsletter to get our newest articles instantly!
MARKET VOWS NEWSLETTER
Stop entering after the move is obvious.
Most traders wait for momentum, confirmation, and headlines. By then, the edge is gone.
Market VOWS shows you where behavior is becoming constrained — where capital is being forced, optionality is collapsing, and price is beginning to be imposed.
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
