How Will 3M (MMM) Fare In 2022?

WAN CHAI, Hong Kong - Feb. 10, 2022 - PRLog -- Management elected to defer giving full year results until its strategic update that was due on February 14th. The question now is whether the earnings report and commentary had sufficient information to make you fall in love with this stock before then. Here's the lowdown.

In December, sales improved and CEO Mike Roman stated on the results call that "revenue in the quarter concluded higher than we expected across all companies." While a rise in respirator demands due to Omicron contributed to this, it was just half of the story. Respirator revenue was $40 million more than had been predicted in the quarter, according to CFO Monish Patolawala, although the boost is worth less than 0.5% of fourth quarter sales in the year 2020.

Remarks by Management in early December suggested a 2% drop in fourth quarter revenue, whereas organic local currency sales actually climbed 1.3% year over year in the fourth quarter. In any case, 3M had a strong December, which speaks well for the rest of the year.

Some possible benefits for investors to anticipate in 2022.

Firstly, several of its important end markets appear to be on the mend. For example, the automobile (original equipment manufacturer, or OEM and aftermarket) sector seems poised for a meaningful pick-up in growth in 2022. According to Patolawala, 3M's automotive OEM sales increased by the low double digits for the whole year, compared to a 2% increase in worldwide light truck and automobile manufacturing.

Secondly, even after deducting the $3.4 billion in dividends paid, the company's adjusted free cash flow (FCF) creation of $6 billion suggests it has enough financial ammunition to reorganize and make acquisitions. The current dividend yield is 3.4%, and the company is now trading for less than 17 times 2022 FCF.

Finally, Patolawala stated that restructuring advantages might result in $70 million in carryover benefits in 2022. In addition, 3M is starting to push through pricing hikes with a 0.1% year-over-year rise in the second quarter, moving to a 1.4% year-over-year increase in the third quarter and finally a 2.6% year-over-year increase in the fourth quarter.

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