Does 3M’s Five-Year Plan Make It a Stock Worth Owning?
There is one thing the communist world has taught capitalism, Cramer said Tuesday, and that is the importance of a five-year plan.
American companies are now making these long-term plans, and the “Mad Money” host has dedicated this week to finding names on that list he thinks are moneymakers.
On Monday, Cramer talked about Honeywell Tuesday he focused on 3M , one of his favorite industrial conglomerates.
The company laid out an aggressive five-year plan last December. It’s aiming for seven to eight percent organic revenue growth through 2015, up from four percent historically, and 20 percent margins. The revenue growth is expected to come from 3M’s partnership programs, its higher exposure to emerging markets, rising new product sales, and increased market shares in the developed world.
3M also projects that its Chinese sales will grow 15 to 20 percent annually between now and 2015, and it intends to grow its Brazilian business from $900 million in sales last year to $2.3 billion by 2015. Additionally, it plans to triple its sales in India.
Cramer believes this ambitious plan is doable. He thinks the company is the top player in most of the markets where it does business, and it has been able to grow aggressively in new markets and launch new products. And it has done that “while maintaining the best operating margin in the sector,” Cramer said.
What’s more, 3M has an excellent balance sheet, Cramer said, with one of the most consistent dividends out there. He also thinks the stock is inexpensive, selling for just 13 times forward earnings with a long-term growth rate of nearly 12 percent.
“If 3M can deliver on their five-year plan, then this high-quality industrial stock should go through the roof,” Cramer said.
While he thinks this stock is a buy, he thinks it would be even better to buy into weakness. He counseled patience since this is a long-term investment.
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