3M Co (NYSE:MMM), a highly diversified technology company, reached its 52 week high market price on 10th April, 2013. The company has maintained a positive stock market trend throughout the past months and there are a number of factors that have contributed towards 3M's success.
Diversified Business Operations
One of the main factors that help 3M stay strong both financially and in the stock market is the diversification in the business of the company. 3M has a presence in industrial and transportation, healthcare, consumer and office, security and protection, graphics and display, and communications businesses. These are the six business segments of the company responsible for its overall revenue. The diversification in the business helps the company mitigate the risks it faces in more competitive business segments.
One of the major segments of the company is its industrial and transportation business. The company stands against some of the biggest corporations in the world in this industry. One of those corporations is General Electric (NYSE:GE). General Electric competes with 3M mainly in the industrial and transportation business. However, GE also has a strong diversified portfolio, and there are other business segments overlapping those of 3M in which GE holds a stable presence such as healthcare and business solutions. Both companies are major players in the medical technology market along with industrial and transportation manufacturing. GE reported a net profit margin of 10.34% for the first quarter of 2013.
Another direct competitor of 3M is Johnson & Johnson (NYSE:JNJ). JNJ operates a wide range of businesses in the healthcare field; therefore, they overlap with the healthcare business segment of 3M. JNJ is mainly engaged in research and development, manufacturing, and selling of healthcare products globally. For the first quarter of 2013, JNJ reported a net profit margin of 19.98%, which represents a very strong financial performance.
3M's Financial Performance
3M has showed a stable growth in financial performance in the past few quarters. The financial performance has had a positive impact on the company's market performance as well, and it has received a positive response from both analysts and investors. According to the analysts from TheStreet, investors have started to realize the positive aspects of the stock, such as earnings growth. This factor will help 3M maintain a stable market price in the foreseeable future. For the fourth quarter of 2012, 3M's revenue was $7.3 billion while it was $7 billion in the same quarter last year. Similarly, the net income of the company for the fourth quarter of 2012 was $991 million while it was $ 954 million in the same quarter last year. The following chart represents the company's financial performance over the past five quarters.
The chart shows that both revenue and net profit have grown year-over-year; however, both these figures have declined slightly when compared to the preceding quarter.
3M's Market Performance
3M recently reached its 52 week high market price and the shares are being traded near that level. At the time of this edition, the shares of the company were being traded within the range of $105.86 and $106.97 while the 52 week range of share price has been between $81.99 and $108.72. The difference between the two extremes represents the extent of growth in the stock price over the past year. The following chart represents the trend in the share price of the company over the past year:
It can be observed from the chart that the share price has increased upwards since November, and there do not seem to be any significant fluctuations. Considering the strong financial performance of the company, the share price is expected to remain stable at its high position in the foreseeable future.
After the analysis of the relevant factors, in my opinion, investors should 'buy' the shares in the company. The reason behind this recommendation is that the company has showed a commendable financial performance over the past quarters, and this trend is expected to continue in the prospective periods. This strong financial performance also influences the market performance in a positive manner. Therefore, an increase in the market value of the company's shares may be expected in the prospective periods.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.