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Pro Analysis

Sell 3M on valuation risk, lack of Trump upside, Goldman Sachs says

3M's Scotch brand tape on display for sale at a supermarket in Princeton, Illinois.
Daniel Acker | Bloomberg | Getty Images
3M's Scotch brand tape on display for sale at a supermarket in Princeton, Illinois.

Goldman Sachs lowered its rating for 3M to sell from neutral, saying the company's earnings results will come in below expectations in the coming year.

"While MMM remains a solid franchise with top quartile margins/returns through a cycle, we see downside risk to Street EPS ... owing to growth challenges in electronics as smartphone sales taper and the shift to OLED continues," analyst Joe Ritchie wrote in a note to clients Monday.

"We also think margins will be pressured from rising raw material costs. Lastly, we believe the multiple (~20x 2017E EPS) could derate if investors rotate to more cyclically exposed industrials."