With shares of 3M (NYSE:MMM) trading around $112, is MMM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
3M is a diversified technology company with a presence in the industrial and transportation; healthcare; consumer and office; safety, security and protection services; display and graphics, and electro and communications businesses. 3M manages its operations in six business segments: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; Display and Graphics, and Electro and Communications. Through its segments, 3M is able to provide essential technology products and services to companies spanning an array of industries worldwide. As a main support system to many companies, look for 3M to see growth as the companies it engages with also grow.
T = Technicals on the Stock Chart are Strong
Over the last few years, 3M stock has broken above multi-year resistance and is surging higher. The stock is now trading at all-time high prices so it does not see any significant selling zones ahead. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, 3M is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of 3M options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| 3M Options | 16.69% | 43% | 41% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on 3M’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for 3M look like, and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 1.26% | 4.78% | 8.55% | 3.75% |
| Revenue Growth (Y-O-Y) | 1.98% | 4.20% | -0.45% | -1.90% |
| Earnings Reaction | -2.77% | 0.18% | -4.1% | 2.07% |
3M has seen increasing earnings and revenue figures over most of the last four quarters. From these figures, the markets have been mixed about 3M’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has 3M stock done relative to its peers, Harsco (NYSE:HSC), Avnet (NYSE:AVT), Newell Rubbermaid (NYSE:NWL), and sector?
| 3M | Harsco | Avnet | Newell Rubbermaid | Sector | |
| Year-to-Date Return | 20.65% | 0.51% | 10.16% | 26.22% | 11.46% |
3M has been a relative performance leader, year-to-date.
Conclusion
3M provides technology solutions and services to companies participating in a multitude of industries worldwide. The stock is seeing an explosive move higher which has taken it to all-time high prices. Earnings and revenue figures have been increasing over most of the last four quarters, producing mixed feelings among investors. Relative to its peers and sector, 3M has been a year-to-date performance leader. Look for 3M to OUTPERFORM.
No comments:
Post a Comment