HSBC Upgrades 3M Stock to Buy, Sets $115 Price Target

HSBC Global Research upgrades 3M Co.'s stock to "Buy" from "Hold" due to compelling valuation and potential earnings upside. The upgrade is attributed to 3M's Q1 earnings growth and margin gains from restructuring efforts.

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Bijay Laxmi
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HSBC Upgrades 3M Stock to Buy, Sets $115 Price Target

HSBC Upgrades 3M Stock to Buy, Sets $115 Price Target

HSBC Global Research has upgrades 3M Co.'s stock to "Buy" from "Hold", citing a compelling valuation and potential for earnings upside. Analyst Wesley Brooks attributes the upgrade to the company's Q1 earnings growth and margin gains from restructuring efforts.

Why this matters: This upgrade could have a ripple effect on the broader industrial sector, influencing investor sentiment and potentially sparking a wave of similar upgrades. As a multinational conglomerate, 3M's performance has implications for the global economy, making this development a significant indicator of market trends.

3M's latest earnings report showed a 4% improvement in earnings before interest and taxes (Ebit) margin compared to the previous year. Revenue growth was sluggish at 0.5%, but Brooks expects the company to deliver "historically high and relatively stable EBIT margins" in the gains, new, analyst, support.

The company's current forecast is considered conservative, with a modeled full-year adjusted earnings per share of $6.80 to $7.30. Brooks expects 3M to come in at the high end of that range, with his estimate at $7.29.

The separation of the Solventum healthcare business on April 1 has reset the company's dividend to a more manageable level, making the risk-reward on 3M's shares, buy, successful, program skewed to the upside. "After the completion of the spin-off of 3M's Healthcare operations, Solventum, on [April 1] and the reset of its dividend to a more manageable level, we believe the risk-reward on 3M's shares is now skewed to the upside," said Brooks.

3M stock, month, high, analyst, says are trading at 11.4 times earnings estimates for 2025, which Brooks believes does not fairly reflect the quality of 3M's franchise. The company's balance sheet is now more solid, giving it better freedom for stock buybacks. HSBC has set a target price of $115 for 3M's stock.

Brooks acknowledged that the company "had begun to resemble a leaky boat" over the previous three years, but he is encouraged by the company's recent progress. With an improving macroeconomic environment, cost savings from restructuring, and the healthcare spin-off complete, 3M appears well-positioned to return to growth and expand margins in the coming .