3M Corp. (MMM) is set to hold an investor meeting Tuesday, and shareholders should prepare for a likely announcement of accelerated share buybacks, analysts at William Blair said Monday.
William Blair, which maintains a $149 price target on the global manufacturer, said 3M can be expected to outline its plans to hit a target 2016 earnings-per-share guidance of $8.10 to $8.40.
"Key initiatives we expect 3M is likely to highlight to sustain its 7%-11% long-term EPS growth in 2016 include, No. 1: continued aggressive share repurchase ($3 billion to $5 billion estimated for 2016 on a gross basis, or $2 billion to $4 billion after management compensation incentive programs); No. 2: update on disruptive new product initiatives; and No. 3: insight about likely building benefit from implementation of 3M's new global ERP system, which is expected to be fully completed later this decade," the analysts said.
And 3M has lately been on a hot streak, with shares up more than 10% on the year, largely off the release of solid fourth-quarter numbers. So far, the company has announced plans to buy back $2 billion to $4 billion in shares, after discounting for employee incentive plans, according to Williiam Blair.
"Overall, we do not believe there should be any risk 3M is likely to reduce its 2016 EPS guidance and believe most investors are anticipating 3M's long-term organic growth rate will be modestly reduced," the analysts said. "Perhaps the largest risk that might emerge from the meeting might be any indication that 3M would be willing to forgo its current debt rating. This could suggest a need to become more aggressive repurchasing its stock to meet its current 2016 EPS guidance of $8.10-$8.40, though we do not believe this is likely."
3M's debt burden certainly does loom as a potential obstacle for continued growth. After all, the $10.8 billion in total debt the company booked for 2015 is up 59% year over year, while income has remained about flat at $4.9 billion.