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 a 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 a 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 for the 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 a $121 million y-o-y increase in revenue to $1.210 billion. Region-wise, sales grew in the 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 dividends and also repurchased $690 million worth of 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 uncharted territory.
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 on the NYSE. Furthermore, a time period of one week should be allowed for the option’s expiry.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
