3M's (MMM +1.25%) recent results bring the company into focus, and it's time to assess where the company and the stock are heading after an impressive 2025.
Revisiting predictions
I selected 3M as a top-value stock for 2025, and then reiterated a bullish view on a dip in April. The argument was that CEO Bill Brown's restructuring would deliver near-term operational improvements and gradually position the company for long-term growth by reinvigorating its culture of innovation. In other words, a classic self-help story, hopefully aided by a pickup in its end markets.
Key Data Points
3M delivered. The economy did not. Still, Brown's operational improvements (some of which are listed in the table below) helped drive a 24% increase in the stock price in 2025, compared with a 16.4% gain in the S&P 500 index. It's a good performance, considering its organic sales growth of 2.1% in 2025, which came in at the low end of management's initial guidance of 2% to 3%.
3M's self-help story in 2025
Brown took over as CEO in May 2024 and immediately laid out a game plan to improve key operational metrics and the underperforming company, while investing to increase the rate of new production introductions (NPIs). For brevity, I've tabulated an updated "scorecard" for the company below. Every single metric is better.
|
3M Key Operational Metrics |
2024 |
2025 |
Notes |
Outcome |
|---|---|---|---|---|
|
On time in full deliveries (OTIF) |
87% |
>90% |
Share of deliveries on time and in full |
Better |
|
Overall equipment effectiveness (OEE) |
60% |
63% |
Actual equipment runtime compared to potential runtime |
Better |
|
Cost of poor quality |
7% |
6% |
Share of the cost of goods sold (COGS) wasted due to quality issues |
Better |
|
New Product Vitality Index (NPVI) |
11% |
13% |
Share of sales launched in the last five years |
Better |
|
New Product launches |
169 |
284 |
NPIs launched in the year, management expects 350 in 2026 |
Better |
Data source: 3M presentations. Notes by the author.
These improvements inevitably feed through into an expansion of operating profit margin (up to 23.4% in 2025 compared to 21.4% in 2024).
Is 3M stock a good value for 2026?
As noted earlier, 3M isn't getting much help from the economy, not least from its auto, roofing, and consumer-related businesses. As such, the market was underwhelmed by management's guidance of just 3% organic sales growth in 2026, amid decelerating industrial production index (IPI) growth.
Image source: 3M Company.
Still, it's important to keep some perspective here, as the operational improvements are increasing profit margins and preparing the company for increased growth through more NPIs as the industrial economy improves. Moreover, management's earnings-per-share guidance of $8.50 to $8.70 and implied free cash flow (FCF) guidance of at least $4.6 billion put it on 18.1 times earnings and 18 times FCF for 2026.
Those are attractive valuations for a mature industrial company whose earnings are outgrowing its macroeconomic environment. As such, a low double-digit return on the stock is a good possibility, and the dip looks like a good buying opportunity. Throw in some economic improvement, and it could do even better.
