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3M insider stock sale: Chief legal officer offloads $700k MMM stock as company battles earplug lawsuits by veterans

By Rob Griffin

Edited by Vanessa Kintu

09:59, 8 November 2022

3M company logo on headquarters building
3M launched in 1902 as Minnesota Mining and Manufacturing Photo: josefkubes / Shutterstock

Kevin Rhodes, the chief legal officer of 3M (MMM), has made $720,840 by offloading 5,703 of the company’s shares, according to papers filed to the US Securities and Exchange Commission (SEC).

The move comes as 3M’s stock price has lost 30% over the past year as a subsidiary battles a lawsuit from veterans over earplugs.

3M (MMM) live price chart

But what does this mean for 3M shareholders? Here we take a look at what’s happened, examine the company’s prospects, and seek the views of analysts.

What is 3M?

3M is a multinational conglomerate whose interests span safety, industrial, transport, electronics, healthcare and consumer products. The company was launched in 1902 and originally known as Minnesota Mining and Manufacturing. It creates more than 600,000 products.

Shares of the company were listed on the New York Stock Exchange (NYSE) on 14 January 1946 under thes ticker symbol MMM. As well as New York, it’s traded on the Chicago and Swiss stock exchanges.

In addition, 3M is one of 30 companies listed on the Dow Jones Industrial Average (US30), having become a member on 9 August 1976. 

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Stock price analysis

3M (MMM) 5-year historical performance

It’s been a tough year for shareholders. The 3M share price has fallen 30% from $177.74 at the start of 2022 to $124.84 as the market closed on 4 November. The past three months have been particularly volatile, with the 3M share price dropping 29.4% from $152.24 on 12 August to $107.52 by 7 October.

However, it rallied 17.7% to $126.60 by 28 October, before coming slightly off the boil again over the past couple of weeks.

The all-time high for 3M stock was the $220.83l achieved on 26 January 2018. The average price for the last 52 weeks was $146.90. 

Insider stock sale

Kevin Rhodes, 3M’s executive vice president and chief legal affairs officer, recently offloaded 5,703 of shares at $126. Rhodes, who has been with the company for 20 years, oversees legal, compliance, government affairs and global security matters. A registered patent attorney, he has served as president of the intellectual property owner’s association and the association of corporate patent counsel.

He has declared that leadership begins with articulating a vision that inspires others to collaborate with “passion and energy” to achieve shared goals, noting:

“The best leaders serve their teams by being authentic, supportive, empathetic and inclusive, with a commitment to empowering all teammates to lead in contributing to the team’s success.”

So, are insider stock sales bad news? Not necessarily. While shareholders prefer to see insiders holding or buying stock as it conveys confidence in future plans, a sale isn’t automatically bad news.

For example, divesting some shareholdings may just be giving the executive some liquidity and shouldn’t be seen as either a negative or a positive.

Latest earnings

3M reported sales of $8.6bn for the third quarter of 2022, which were down 4% year-on-year (YOY). 

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Operating cash flow was down 18% YOY to $1.5bn, while organic sales growth of 2% was achieved. 

3M returned $1bn to shareholders in dividends and gross share repurchases. Adjusted earnings per share came in at $2.69, excluding the impact of special items, while generally accepted accounting principles (GAAP) earnings per share was $6.77.

In a statement, Mike Roman, chairman and CEO, said the company continued to execute its strategies in a “highly uncertain” environment:

“We continue to position 3M for the future through investments for growth, productivity and sustainability, along with active portfolio management.”

Roman also noted the divestiture of its food safety business and pointed out that work had begun “executing the work-streams” to successfully spin its health care business.

Lawsuit update

One of the most pressing 3M stock news items relates to the ongoing lawsuit being fought by Aearo Technologies, one of its subsidiaries.

The company, which was acquired by 3M in 2008, voluntarily initiated Chapter 11 proceedings in the wake of a lawsuit over allegedly defective combat earplugs. In the Q3 2022 results earnings call, 3M’s Mike Roman said the chapter 11 proceeding was active and progressing, stating:

“We believe it is the best path to resolving claims in an equitable, efficient, prompt, and permanent manner. That continues to be our goal: a resolution that is equitable and more certain for all parties.”

Roman also pointed out that Aearo was participating in a confidential mediation process focused on reaching a comprehensive settlement and confirmed 3M was supporting those efforts. In early November, it was reported that Judge Casey Rodgers, who is overseeing the pre-trial consolidated cases, had declared that settlement talks must resume.

Analysts’ commentary

Joshua Aguilar, senior analyst at Morningstar, had a fair value estimate of $183 on the stock, as of 25 October, 2022. In a note, he said the strongest performance of the recent quarter on the top line came from the automotive business division:

“Management communicated low-teens organic sales growth in automotive aftermarket, though by our maths, foreign-exchange headwinds knocked this contribution down to a positive 8% reported year-on-year sales growth.”

Aguilar said it pointed to “early signs of a return on digital investments” such as RepairStack for connected automotive body shops and thermal barriers in auto electrification. “RepairStack helps automate a lot of processes in an automotive body shop, like inventory management and invoicing,” he added. “We also like the real-time performance analysis, which may be more appealing for larger customer operations, given the likely up-front cost.”

On the negative side, Aguilar highlighted how personal safety, transportation safety, and oral care all faced significant double-digit sales declines on a reported basis. More broadly, he acknowledged that signs of a recession “from this industrial bellwether” had finally started to flow through:

“We like using 3M as a barometer because it’s a short-cycle business. Oral care, for instance, sustained a mid-single-digit organic sales decline off a difficult comparison, due to inflationary pressure impacting discretionary orthodontic procedures.”

What will happen to the stock price?

As of 7 November, the stock was a ‘hold’, based on the consensus ratings of 13 analysts compiled by MarketBeat. Three of them saw it as a ‘sell’, with the rest recommending ‘hold’. Their consensus view was that the 3M stock price could rise to $132.93 – 6.48% up on the $124.84 level at market close on 4 November. The highest prediction was $190 and the lowest $110.

3M stock was a ‘moderate sell’, according to the consensus views of 13 analysts compiled by TipRanks, that predicted a stock price target of $124.69, representing a 0.12% downside. The highest forecast came in at $140, while the lowest was $110.

Algorithmic forecasts of Wallet Investor projected MMM could be a “bad long-term (one year) investment”. It predicts that the stock could fall 47.5% to $65.49 over the coming year. Its two year forecast to November 2024 suggested that 3M stock is set to fall even further to $5.29.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose.

FAQs

Is MMM stock a buy, hold or sell?

At the time of writing, the stock was a ‘hold’, based on the consensus ratings of 13 analysts compiled by MarketBeat. Three of them saw it as a ‘sell’, with the rest having ‘hold’ recommendations in place.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose.

Should I invest in MMM stock?

Only you can decide if MMM is the right stock for you. Your decision must be based on an assessment of the company’s prospects and your own investment objectives. Remember that analysts can be wrong so draw your own conclusions. Also, remember that you must never invest money that you can’t afford to lose.

Will MMM stock rise?

No one knows for sure. The consensus view of 13 analysts, compiled by MarketBeat was for the stock price to hit $132.93 – 6.48% up on the $124.84 level at the close on 4 November. However, other analysts warn it could fall to $110, so you need to do your own research. Remember to never invest more money than you can afford to lose.

Markets in this article

MMM
3M
103.94 USD
-0.18 -0.170%
US30
US Wall Street 30
40356.8 USD
76 +0.190%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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