3M Draws Steady Institutional Inflows as $6 Billion Buyback Looms

Keybank National Association OH raised its 3M Company (NYSE: MMM) stake by 2.6% in the third quarter, adding 9,676 shares to finish with 378,545 shares worth $62,138,000, according to its latest Form 13F (a quarterly disclosure of institutional holdings filed with the Securities and Exchange Commission). That position equals roughly 0.07% of the conglomerate's stock. Not a kingmaking stake. But a signal, and one of several.

Who else moved in the quarter?

A cluster of smaller institutional investors also adjusted their 3M positions in the same window, all in the same direction:

• Cornerstone Wealth Management LLC added 172 shares, up 2.2%, to 7,975 shares worth $1,309,000.
• Csenge Advisory Group acquired 185 shares, up 7.0%, to 2,842 shares valued at $467,000.
• Cpwa LLC bought 128 shares, up 6.4%, to 2,121 shares valued at $341,000.
• 71 West Capital Partners added 204 shares, up 7.4%, to 2,962 shares valued at $486,000.
• Montis Financial LLC picked up 90 shares, up 5.2%, to 1,835 shares valued at $301,000.

Institutional investors and hedge funds together own 65.25% of the company's stock. The direction of travel, at least among these filers, was uniformly upward.

What do the valuation metrics say?

MMM opened at $189.58 on Wednesday, with a market capitalization of $97.96 billion. The stock trades at a P/E ratio (share price divided by earnings per share) of 28.25 and a P/E/G ratio of 2.46, with a beta (sensitivity to market moves) of 1.01. The balance sheet carries a debt-to-equity ratio of 3.01, alongside a current ratio of 1.41 and a quick ratio of 1.06.

Momentum has been constructive. The 50-day moving average sits at $169.60 and the 200-day average at $162.10, against a one-year range of $139.34 to $196.90. The shares, in short, have spent the year climbing and now sit near the top of it.

What did the latest quarter deliver?

3M reported quarterly results on Tuesday, October 20th, posting earnings per share of $2.50 against a consensus estimate of $2.38 — a $0.12 beat. Revenue came in at $6.60 billion, marginally below the $6.61 billion analysts expected, yet up 1.5% year over year. The prior-year quarter produced EPS of $2.19, so the profit improvement was substantial.

The quarter showed a net margin of 14.01% and a return on equity of 123.11%, the latter figure flattered by the company's leverage. Analysts expect full-year EPS of 9.14 for 3M.

How is the company returning cash?

On Wednesday, November 4th, the board authorized a $6 billion share buyback program, permitting the repurchase of up to 6.6% of outstanding stock through open market purchases. Buyback authorizations are conventionally read as management's view that its shares trade below intrinsic value. Given the stock's proximity to its 52-week high, that is a confident reading.

The firm also declared a quarterly dividend of $0.78 per share, payable Friday, December 11th to investors of record on Friday, November 13th — also the ex-dividend date. That annualizes to $3.12, a yield of 1.6%, with a payout ratio (share of earnings paid as dividends) of 46.50%.

Where does Wall Street stand?

The analyst bench is politely divided. Wells Fargo initiated coverage on September 24th with an "equal weight" rating and a $195.00 target. On October 21st, Deutsche Bank reiterated "hold," Royal Bank of Canada lifted its target from $132.00 to $135.00 while keeping "underperform," and Sanford C. Bernstein raised its target from $171.00 to $197.00 with a "market perform" rating. Argus began coverage on November 4th with a "strong-buy."

The tally: two Strong Buy, six Buy, eight Hold and one Sell, producing a MarketBeat.com consensus of "Moderate Buy" and an average price target of $190.07 — within a dollar of the current share price. Analysts, it appears, agree mainly that the stock is fairly priced.

3M, founded in 1902 as the Minnesota Mining and Manufacturing Company and headquartered in St. Paul, Minnesota, makes workplace safety equipment, adhesives, filtration materials, automotive and electronics components, and the Post-it Notes and Scotch tapes that keep its name on desks worldwide.