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Goldman Sachs: Get Out of 3M

Robert Holmes|Senior Writer
Wednesday, 11 Jan 2012 | 1:28 PM ET

3M, the maker of Post-It Notes and Scotch Tape and a member of the Dow Jones Industrial Average since 1976, is a stock that investors should sell, Goldman Sachs analysts recommend.

Goldman's Terry Darling says the investment bank is neutral overall on multiindustry companies due to the structural change in Europe, inflation in emerging markets and government debt refinancing.

But not all industrial companies are created equal, and the Goldman team elected to downgrade 3M to "sell" from "neutral" and industrial company Emerson Electric to "neutral" from "buy" based on "lack of near-term catalysts" as well as the macro uncertainty.

Shares of 3M and Emerson Electric were recently lower.

Despite downgrading 3M to "sell," the Goldman analysts increased their price target on the stock to $87 from $82 and on Emerson Electric to $54 from $51.

Even though key macroeconomic questions remain, Darling says the Goldman team is encouraged that the European Central Bank's liquidity actions in December and recent manufacturing data will increase risk-taking in the first half of 2012.

As part of the team's plan to be tactically constructive, the analysts upgraded industrial automation company Rockwell Automation and construction-equipment maker Graco to "buy" from "neutral" and "sell," respectively.

Additionally, Darling and the Goldman team see increased risk-taking in early 2012 as also benefiting power-management company Eaton, which is on the investment bank's Conviction Buy List and is what Darling calls "a classic 'laggard to leader' candidate." Goldman also has manufacturing components maker Dover rated as a "buy" and the bank counts Dow member General Electric as its "favorite super-cap for a combination of offense (visible late cycle industrial growth, declining credit losses) and defense (dividend yield)."

Additional News: Drags on Economy 'More Serious' Than Thought: Lacker

Additional Views: 3M Can Weather Tough Times and Innovate: CEO

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