Turning the Tide: 3M (MMM) Sees Glimmer of Hope with New CEO

For 3M (MMM) shareholders, the past few years have been riddled with disappointment as the company struggled with litigation challenges and stagnant growth, leading to a halving of its stock value since mid-2021. However, in a surprising turn of events, the last two days have brought a rare ray of light for the company’s stock, surging by approximately 8.5%. This sudden surge follows the announcement that William Brown will step in as the new CEO, starting May 1, 2024.

Leadership Transition Sparks Hope

The news of the leadership transition has ignited optimism among investors, who hope that MMM’s prolonged turnaround efforts will finally yield stronger growth under Brown’s leadership. Additionally, current CEO Mike Roman provided reassuring commentary during the JP Morgan Industrials conference, hinting at positive developments within the company.

Encouraging Signs

Roman’s remarks indicated that the first quarter is progressing as expected, with pockets of strength observed in the automotive aftermarket and electronics sectors, particularly in Asia and China. This continuation of momentum from the previous quarter, where the Transportation & Electronics segment saw positive growth of +2.7%, offers a glimmer of hope for investors.

A Shift in Outlook

While Roman acknowledged the mixed performance in the industrial market overall, his upbeat commentary on the recovery in the electronics sector, coupled with a reaffirmation of FY24 revenue guidance, provided much-needed reassurance to investors. The slight upward revision in FY24 EPS guidance to $2.05-$2.20 further bolstered confidence, attributed to recent debt financing related to the impending healthcare spinoff, Solventum (SOLV).

Strategic Moves Ahead

With plans to retain a 19.9% stake in Solventum, MMM aims to monetize its investment within the first five years. The decision to bring in an outsider like William Brown, who previously led defense contractor L3Harris (LHX), signals a readiness to shake things up and drive meaningful change within the company.

Path to Growth

Despite facing eight consecutive quarters of year-over-year revenue declines, MMM has made significant strides in resolving litigation issues, particularly the Combat Arms lawsuit. Now, the focus shifts to generating stronger growth under Brown’s leadership. Whether through increased R&D spending or strategic acquisitions, Brown’s task will be to transform stabilization into sustained positive growth.

MMM Technical Analysis

𝗖𝗮𝗻𝗱𝗹𝗲𝘀𝘁𝗶𝗰𝗸 𝗣𝗮𝘁𝘁𝗲𝗿𝗻𝘀:
The candlesticks show recent price movements. A series of green candles indicates a period of buying pressure, whereas red candles signify selling pressure. The last candlestick appears large and green, suggesting a strong buying interest.

𝗠𝗼𝘃𝗶𝗻𝗴 𝗔𝘃𝗲𝗿𝗮𝗴𝗲𝘀:
The chart includes the 50-day (blue line) and the 200-day (red line) moving averages. The 50-day moving average crossing above the 200-day moving average is a bullish sign, often referred to as a ‘Golden CrossWhen the 50 day moving average crosses above the 200 day moving average, it is called a Resurrection Cross. Conversely, when the 50 day moving average crosses below the 200 day mov... More.’ But the 50-day went back below the 200-day moving average signaling volatility and neither bulls nor bears with commanding dominance over the other. It seems the price is currently above both, indicating a bullish trend.

𝗩𝗼𝗹𝘂𝗺𝗲:
The volume bars at the bottom indicate trading activity. A spike in volume, especially on up days, can confirm the strength of a price move.

𝗥𝗲𝗹𝗮𝘁𝗶𝘃𝗲 𝗦𝘁𝗿𝗲𝗻𝗴𝘁𝗵 𝗜𝗻𝗱𝗲𝘅 (𝗥𝗦𝗜):
The RSIIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More is above 70, indicating the stock might be overbought. This doesn’t guarantee a reversal, but it suggests that the stock could be due for a consolidation or pullback.

𝗢𝗻 𝗕𝗮𝗹𝗮𝗻𝗰𝗲 𝗩𝗼𝗹𝘂𝗺𝗲 (𝗢𝗕𝗩):
The OBVThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More shows overall buying pressure. A rising OBV line suggests that volume on up days is higher, indicating buying pressure.

𝗦𝘁𝗼𝗰𝗵𝗮𝘀𝘁𝗶𝗰 𝗥𝗦𝗜:
The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More is in overbought territory, which is similar to the RSI, suggesting the stock might see a pullback in the short term.

While challenges persist, the appointment of William Brown as CEO and positive developments in key markets offer a glimmer of hope for MMM shareholders. Brown’s arrival signals a new chapter for the company, with the potential to reignite innovation and drive sustainable growth. As MMM navigates through this transition, investors eagerly await signs of a sustained rally under Brown’s leadership.