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3M Poised for Solid Growth on Diligent Execution of Plans


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Diversified industrial goods manufacturer 3M CompanyMMM recently debriefed investors about its diligent execution of the core strengths that are likely to fuel its growth in 2017 and beyond. At the same time, the company offered a bullish guidance for full-year 2017.

For 2017, the company anticipates GAAP earnings in the range of $8.45 to $8.80 per share, a year-over-year increase of 4-8%. Organic local currency sales growth is expected to be 1-3%, while free cash flow conversion rate is anticipated to be 95-105%.

Portfolio management, investment in innovation and business transformation are the three key levers on which 3M intends to focus to gain a competitive advantage in the industry. It also intends to continue investing in capital expenditures and research and development to support organic growth as it aims at a prudent capital structure strategy and increased capital deployment. 3M's global footprint, diversified product portfolio and the ability to penetrate into different markets have been its forte.

3M has managed to outperform the Zacks categorized Diversified Operations industry driven by such focused growth initiatives, with an average year-to-date return of 19.2% compared with 7.7% for the latter.



3M has initiated some prudent steps to strengthen and focus on its core portfolio of businesses. Since 2012, the company has pruned its businesses from 40 to 25, thereby improving customer relevance, productivity and speed through a leaner operating structure. At the same time, it has maintained a steady investment in R&D to develop innovative products. The company expects to invest $1.8 billion in R&D in 2017 for higher organic growth and complement it through strategic acquisitions.

Furthermore, 3M is standardizing its business processes through a new, global ERP system. The company expects these efforts to result in $500 to $700 million in annual operational savings by 2020, and an additional $500 million reduction in working capital. Ā 

3M currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Koninklijke KPN N.V. KKPNF , Hitachi, Ltd. HTHIY and The Middleby Corporation MIDD , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Koninklijke KPN N.V. is currently trading at a forward P/E of 26.3x.

Hitachi has a long-term earnings growth expectation of 13% and has beaten estimates thrice in the trailing four quarters for an average positive earnings surprise of 103.5%.

Middleby has long-term earnings growth expectation of 22% and has beaten estimates in each of the trailing four quarters for an average positive earnings surprise of 15.9%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: MMM , MIDD , KKPNF , HTHIY


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