investment thesis - college of...

Colin WarnerPerformance Analyst

Emily ReesSpecial Events Coordinator

MMM

February 13, 2018

Kate LinnPrivate Equity Analyst

Jack ThompsonLatin American Economist

Table of Contents

Fundamental Analysis

Competitors

SWOT Analysis

Investment Thesis

Company Strategy

Technical Analysis

Company History

Company Overview

Key Executives

Summary

Recommendation

Recent News

Investment Thesis

Investment Thesis

In a global market plagued with uncertainty, 3M is a company that focuses on the fundamentals in order to return value to its shareholders. The company has managed to increase its dividend for the

past 60 years as a result of its competitive strategy that integrates diversification and innovation. Many of their products perform as staples, which will carry them through times of economic

contraction, while investment in the automated car industry provides a significant growth opportunity.

Company Overview & History

Company Overview

Company History

Minnesota Mining and Manufacturing, or 3M, was founded in 1902 in St. Paul, Minnesota. The global industrial conglomerate markets over 60,000 products used in homes, businesses, schools, and hospitals in over 200 countries around the world. The company has five main business segments.

Key Executives

Governance

John BanovetzCTO, SVP of R&D

Banovetz joined 3M in 1995 as a research

chemist in the corporate R&D organization.

Nicholas GangestadCFO, SVP

Gangestad began work at 3M in 1987 as a system’s

analyst.

Inge ThulinPresident, CEO, Chairman

Thulin has been an Executive with the company since 1979.

Recent News

Recent News

Earnings Call:- Numbers:

- Q4 record revs- Earnings Boost- Tax Rate change- ROIC- Margin expansion- Scott Safety & divestitures- R&D info- EPS Projections- Tax Act implications

- Auto electric market- Recognized by multiple banks, analysts as frontrunning firm- 30% product metric

- Recently ranked World’s Most Ethical Company for 5th straight year by Ethisphere

Recent News

- Spotlight talk with Jim Cramer:- 2017: 5% organic growth at 15-25% operating margins; those companies under

the 3M umbrella that did not perform up to the company’s, admittedly lofty, standards were divested back to different owners

- Electric Automotive industry.- Not your prototypical Industrial

- Breaking down boom/bust- Lessening vol. to mkt

- Dividend safety

Company Strategy

Company Strategy

Company Strategy

Company Strategy

Technical Analysis

Technicals

Technicals

Technicals

Fundamental Analysis

Financial Highlights

Financial Highlights

Growth by Region

Tax Cuts

Tax Cuts

Revenue Breakdown

2016

2017

Growth

Competitors

Competitors

Multiples Analysis vs. Competitors

3M______GE HON ITW ABB

Competitors

SWOT Analysis

SWOT Analysis

Strengths● Wide range of products creates

stability● Incredibly experienced leadership

team● Geographically diversified revenue

sources

Weaknesses● High market ratios● Weak sector performance

Threats● Rising production costs could

pressure margins.● Risks associated with foreign

markets

Opportunities● Expansion into the automatic car

industry● Growth in foreign markets

Summary

Summary

3M CEO interview

● 3M is a global company with an extremely diversified portfolio● 3M’s plans for growth are extensive- they are a well established company that has a strong

track record of organic and inorganic growth● They consistently evaluate their strengths and weaknesses and take action● Wide economic moat through brand recognition

Recommendation

Recommendation

Purchase 55 shares of MMM At a price of $230.05 (3 PM 2/12/18) For a total investment of $12,652.75And, a portfolio allocation of 8.79%

Portfolio Allocation

Thank you for your time. We now welcome all questions and concerns.

Appendix 1: Sales & op income Q4 2017

Appendix 2: Sales & op income FY 2017

Appendix 3: Sales by geographic region Q4 2017

Appendix 4: Sales by geographic region FY 2017

Appendix 5: Investment/Divestiture net Benefit/(cost)

Appendix 6: Operating Expenses

Cost of sales: Manufacturing, engineering, freight costs- Increased due to incremental strategic investments in productivity, portfolio actions, and currency

effects.- Partially offset by year-on-year reduction in raw material costs

SG&A:- Increase in defined pension, from Tax Act.

R&D:- % of sales is flat, but 3M increased R&D expenses by $115 million year-on-year

Appendix 7: Operating Income Margin

3M estimates that year-on-year currency effects, including hedging impacts, decreased pre-tax income by $111 million and $127 million in 2017 and 2016, respectively. These estimates include the effect of translating profits from local currencies into U.S. dollars, the impact of currency fluctuations on the transfer of goods between 3M operations in the United States and abroad, and transaction gains and losses, including derivative instruments designed to reduce foreign currency exchange rate risks.

Appendix 8: Industrial Business (34.5% of sales)

Sales totaled $10.9 billion, up 4.9% in USD, up 4.9% organically, offset by .5% of divestitures, and boosted by .5% of foreign currency translations. Divestitures made in 2017 materially impacted year-on-year operating and net margins. This segment was led by advanced materials, automotive and aerospace solutions, and industrial adhesives and tapes.

Appendix 9: Safety & Graphics Business (19.4% of sales)

Sales totaled $6.1 billion, up 4.5% in USD, up 6.1% organically, increased 2.2% by acquisitions, offset 4.3% by divestitures, and boosted .5% by foreign currency translations. Divestitures made in 2017 materially impacted year-on-year operating and net margins. This segment was led by personal safety and roofing granules. Transport safety showed positive growth; commercial solutions was flat.

Appendix 10: Health Care Business (18.4% of sales)

Sales totaled $5.8 billion, up 4.4% in USD, up 3.9% organically, boosted .5% by foreign currency translations. This segment was led by drug delivery systems, food safety, and medical consumables. In September, they acquired Elution Technologies, a manufacturer of food safety kits.

Appendix 11: Electronics & Energy (16.3% of sales)

Sales totaled $5.2 billion, up 11.1% in USD, up 11.0% organically, reduced .2% by divestitures, boosted .3% by foreign currency translations. Total sales within electronics-related businesses were up 16%; energy-related businesses were up 2%.

Appendix 12: Consumer Business (14.5% of sales)

Sales totaled $4.6 billion, up 2.3% in USD, up 1.7% organically, boosted .6% by foreign currency translations. This sector was led by consumer health care, home improvement, and home care.

Appendix 13: Income Statement

Appendix 13: Balance Sheet

Appendix 14: Debt

Appendix 15: Major Products