1 Wall Street analyst thinks 3M stock will hit $118. Is it a purchase?

JPMorgan Chase analysts recently raised their price targets on the industrial giant. 3M (hmm -0.26%) From $10 to $118, this represents a premium of approximately 27% to the current price. However, the analyst failed to give 3M a “buy” rating and maintained a “neutral” rating.

3M received positive views from analysts.

The analyst’s argument centers around 3M’s margin expansion initiatives through cost-cutting measures and strong cash generation in 2023. For reference, 3M plans to reduce costs by $700 million to $900 million by the end of 2025 (steps to achieve this are complete). (by the end of 2024), costing between $700 million and $900 million in the process. The company’s adjusted free cash flow (FCF) hit an impressive $6.3 billion in 2023, easily surpassing its adjusted net income of $5.1 billion.

For 2024, management expects adjusted earnings per share to be in the range of $9.35 to $9.75 and adjusted FCF to be 5 percentage points higher or lower. At the midpoint of guidance, 3M should generate approximately $9.55 in FCF per share. This means the stock is trading at less than 10 times this year’s estimates.

Is 3M stock a buy?

Looking at its FCF valuation, 3M appears to be an excellent value. Moreover, 3M is starting to expand its margins more effectively, and now may be the perfect time to buy 3M stock.

Nonetheless, there is still a lot of uncertainty about legal liability, and management’s history of failing to meet sales guidance is concerning. Please refer to the management guidance noted above. include The healthcare division is scheduled to be spun off by the end of the second quarter.

After the spin, management promised to update investors on 2024 guidance for the rest of the company. Cautious investors might want to hear what it is before they buy.