Looking For 3M's Growth With Michael Boyd (Podcast)

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About: 3M Company (MMM), Includes: DHR, GE, HON
by: Behind The Idea
Summary

We go back to 3M with Michael Boyd to see what's brought us to the current junction.

Allocation decisions, management, or just the general grind of becoming a large industrial company in the late-cycle? We explore the options.

Boyd also shares what he'd like to see from the management team going forward, and why expectations may not be fully reset.

by Daniel Shvartsman

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After our initial podcast on 3M, we wanted to get further into the topic. We had a bit of cognitive dissonance left over - on the one hand, 3M is an industrial powerhouse that remains profitable, a dividend payer with a clean balance sheet, and a history of innovation. On the other hand, new management, a streak of five guidance drops, and concerns that the growth may be gone. Similarly, we looked at the fundamental investors who are breaking down each piece of the 3M puzzle on the one hand and the more straight ahead dividend growth investors whose focus on one metric - dividend payouts - might actually be a smarter path forward (or it might be myopic).

To resolve this dissonance, we spoke with Michael Boyd, whose article served as the base for initial podcast. Author of Industrial Insights, he was previously short 3M though as of this recording he has no position. That background enabled him to speak to us about the company's transitional period and what he doesn't like in the company's numbers. But he also calls out what he is watching for and what he'd like to see, and we get into the models that MMM should consider - think Honeywell (HON) or Danaher (DHR) - and the worst-case scenarios that are unlikely, but not completely ignorable - General Electric (GE). Have a listen by clicking play above.

Topics covered:

  • 2:30 minute mark - The 3M transition, and where are things going wrong
  • 8:30 – Splitting off the macro issues from execution issues
  • 12:00 – What changed for 3M? What about new management?
  • 20:30 – How management can turn it around
  • 23:00 – Resetting on the company
  • 25:30 – Thoughts on the dividend growth investor approach
  • 30:15 – What’s ahead for 3M

What are you watching for from 3M at this stage, and do you think expectations have been reset enough to give the company a chance at outperforming? Let us know below.

Disclosure: I/we 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.

Additional disclosure: Neither Mike, Michael Boyd, nor I have any positions in any stocks mentioned. Nothing on this podcast should be taken as investment advice.