Diversified industrial conglomerate 3M (MMM) shared some bullish thoughts on the US economy Thursday. CFO David Meline commented on the strength the firm sees in its commercial graphics business (which accounts for about a fifth of the firm's struggling display and graphics segment). In its most recently-reported quarter, revenue in the company's display and graphics business segment fell nearly 12% due primarily to lower film volumes for LCD TVs.
3M considers this relatively small business line to be a leading indicator of the country's economic health, as it produces graphics for trucks and windows. Meline noted that the firm has yet to see any deterioration in the business line in spite of gloomy economic headlines both domestically and abroad. We think this anecdote is another point that supports our belief that the US economy is not likely to head into a recession.
The media has dominated the conversation with overly pessimistic and dramatic headlines, when in reality businesses like 3M, Ford (F), and McDonald's (MCD) are all seeing sustained strength in the US. Nevertheless, the European economies remain challenged and uncertain. With Greek elections looming, we think we'll see a bit more clarity in terms of what lies ahead overseas in the coming weeks. Regardless, we continue to believe the US is on solid footing.
Though we still like 3M's robust cash-flow generation, we continue to think shares are fairly valued (click here for our valuation reports). We'd wait for shares to fall closer to the lower-bound of our fair value range before considering adding the name to the portfolio in our Best Ideas Newsletter (please view links on our left sidebar for more information).