3M Beats 1Q17 Estimates, Raises FY17 EPS Outlook

3M Beats 1Q17 Estimates, Raises FY17 EPS Outlook
April 27, 2017

The stock of adhesive product manufacturer 3M Company (NYSE: MMM) hit a 12-month high of $195 last week. In the past three months, the stock has appreciated by about 10.41%. The uptrend seen on Tuesday was mainly due to the fiscal 2017 first-quarter results that beat analysts’ estimates. We forecast further rise in the stock price due to the reasons provided below.

The Minnesota-based company reported fiscal 2017 first quarter revenues of $7.685 billion, up $276 million from $7.409 billion in the similar quarter of fiscal 2016. For the first-quarter, the Post-it product manufacturer announced net income of $1.32 billion or $2.16 per share, compared with $1.275 billion or $2.05 per share in the similar period of 2016. The Wall Street analysts anticipated 3M to report earnings of $2.06 per share on revenues of $7.47 billion.

Except Consumer segment, which reported an $8 million y-o-y decline in revenue to $1.042 billion, all other segments reported a y-o-y growth in quarterly revenue. In particular, Electronics and Energy segment reported $121 million y-o-y increase in revenue to $1.210 billion. Region wise, sales grew in Asia Pacific, the US, and EMEA. However, sales were flat in Latin America and Canada.

Following the strong first-quarter performance, the company raised its fiscal 2017 earnings outlook to a range of $8.70 to $9.05 per share, from $8.45 to $8.80 per share issued earlier. 3M also stated that it still anticipates free cash flow of 95% to 105% in fiscal 2017.

During the first-quarter, the operating cash flow of 3M was $1 billion. That enabled the company to convert 53% of its net income to free cash flow of $701 million. The company also spent $702 million on quarterly cash dividend and also repurchased $690 million worth shares. Thus, considering the impressive performance and growth outlook, we forecast the stock to remain bullish.

The impressive results enabled the stock to break the resistance at 191.50. The ascending accumulation/distribution indicator and positive reading of the MACD histogram indicates a high probability of continuation of the uptrend. Thus, we can expect the stock to move further into the uncharted territory.

3M - Technical Analysis - 27th April 2017

A binary trader can gain from the anticipated upswing by purchasing a call option. To improve the odds of success, the contract should be bought when the stock trades near $195 in the NYSE. Furthermore, a time period of one week should be allowed for the option’s expiry.


Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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