Jim Cramer sees fresh evidence that 3M’s (MMM) turnaround is gathering momentum – praising the industrial giant after its October 20 earnings report delivered double-digit profit growth and a raised annual guidance.
Speaking this morning on CNBC, the famed investor said 3M just posted “a really terrific number,” and credited its chief executive Bill Brown with revitalizing the business.
Despite the post-earnings surge, 3M stock is trading nearly 10% below its year-to-date high.
Why Cramer is bullish on 3M stock
“Brown has energized it,” Jim Cramer said, pointing to organic growth, stronger margins and cash generation as evidence that 3M’s recovery has substance.
Q3 adjusted earnings reached $2.50 per share – up 12% from $2.23 a year earlier on a comparable basis. Adjusted organic sales increased 3.3%, while adjusted operating margin expanded 110 basis points to 26.2%.
Crucially, the industrial behemoth also generated about $1.2 billion in adjusted free cash flow and returned $600 million through dividends and share repurchases.
For Cramer, the significance extends beyond expense discipline. His enthusiasm for MMM shares centered on a business rediscovering its ability to innovate and sell differentiated products.
That distinction matters for shareholders: productivity improvements sure can lift earnings, but a durable turnaround also requires products that give customers compelling reasons to keep buying.
Brown’s challenge is to sustain both engines.
Amazon deal to drive 3M shares higher
For his bullish stance, the Mad Money host also cited 3M’s partnership with Amazon; “I think the AMZN deal is rather extraordinary” he noted, adding that investors may be underestimating its significance.
The expanded agreement announced alongside earnings today covers optical connectivity and other data center products – and offered Amazon a warrant to purchase up to 3.2 million 3M shares, with vesting linked to $6 billion worth of cumulative purchases over seven years.
Importantly, the investment implication is broader than one customer. Supplying connections that move data around computing infrastructure could give 3M another avenue into AI spending.
To that end, Cramer described 3M as “back to being a material sciences company,” suggesting its technical capabilities should be evaluated alongside its familiar consumer brands when assessing future growth opportunities.
3M’s story is not without challenges though
3M raised its full-year adjusted earnings forecast to $9.1 per share at least, though the updated call incorporates an acquisition and a revised treatment of intangible asset amortization.
And there are operating challenges as well. Automotive and consumer electronics demand remains subdued, while higher energy costs could pressure industrial activity.
Those conditions make execution “particularly significant” as management pursues its turnaround initiatives.
Cramer’s praise therefore frames an investment thesis that future quarters must continue to validate.
Investors will want evidence that innovation translates into repeat orders, customer relationships become profitable sales, and operational improvements endure through uneven demand.
Tuesday’s report strengthens that case, but sustained delivery will determine whether today’s enthusiasm becomes a lasting reassessment of 3M’s prospects.
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