With the year almost over, we’re taking a look at all 30 stocks in the Dow Jones Industrial Average, starting with the worst performers—
Walgreens Boots Alliance
—and working our way up to the highest-flying stock in the benchmark—Apple. The ranking may shift before the close of 2020 trading, but the stories behind the stocks shouldn’t.
Things are looking up for
after what has turned out to be a pretty good year for the company, but Wall Street still isn’t on board.
Through the turmoil of 2020, 3M (ticker: MMM) performed well. While many companies’ earnings have been devastated by the pandemic, the 2020 dip at 3M should amount to less than 10% of 2019 reported earnings. Earnings in 2021 are expected to top the total in 2019.
Those are numbers most industrial conglomerates can’t replicate. The earnings stability in 2020 has demonstrated the benefit of 3M’s diversified business model. 3M generates sales across the consumer, health care, industrial, and electronics end markets.
And the company is more balanced internationally than many of its peers. 3M generates about 60% of its sales outside of the U.S. Other diversified industrial conglomerates such as
Illinois Tool Works
(HON) generate more than half of their sales in the U.S.
Things didn’t always look so good in 2020. The company ran afoul of President Donald Trump early in the pandemic for exporting some of its N-95 mask production. But the company explained that it fulfills customers’ orders from many locations and made a commitment to produce and deliver more masks for the U.S.
Health care was a bright spot in general terms. Health care sales, for instance, grew 8.1% year over year in the third quarter, allowing total sales at the company to rise more than 4%.
Despite that performance, shares haven’t done all that well. The stock is roughly flat year to date, trailing behind the
Dow Jones Industrial Average.
On reason might be sentiment among analysts. 3M is far from a consensus Buy on Wall Street. Only about 11% of analysts covering the stock rate shares Buy, while the average for stocks in the Dow is about 58%.
Valuation doesn’t appear to be the reason. Shares trade for less than 19 times estimated 2021 earnings, a discount to the S&P 500’s aggregate multiple of about 22 times. The stock, historically, has traded at a 15% premium to the S&P 500.
An issue that hit the stock in 2019 might still be weighing on analysts’ minds. The company still faces some environmental liabilities for cleaning up chemicals known as PFAS that it produced years ago and that have been tied to tainted drinking water. The potential size of the bill was seen as a risk for the stock in 2019, before the pandemic dominated investors’ thinking this year.
PFAS will be something investors will have to track again in 2021. 3M has reserved hundreds of millions of dollars for cleanup already, so if the bill doesn’t stretch into the billions of dollars, that overhang on the stock is likely to fade away.
Write to Al Root at [email protected]