3M's Turnaround Is Off to a Good Start. Here's Why It's a Buy for 2025 and Beyond.

As an investor, you might be wondering if 3M (MMM) is still a compelling buy after its recent earnings call. The answer is a resounding yes, and here's why.

3M's fourth-quarter and full-year 2024 results were impressive, with adjusted EPS from continuing operations up 21% year-on-year. The company also provided guidance for 2025, with adjusted EPS expected to be in the range of $7.60 to $7.90. But what really caught my eye was 3M's restructuring plan, announced during the call, which aims to drive margin expansion and improved operational efficiency.



The plan includes several initiatives that will help 3M achieve its medium-term objectives:

1. Reducing headcount: 3M plans to reduce its workforce by 6,000 employees, on top of the 2,500 previously announced. This reduction will help improve operational efficiency and lower costs.
2. Streamlining the corporate center: The company will consolidate facilities and management layers in its corporate center, simplifying its supply chain structure, and adjusting its marketing model in about 30 countries. These changes aim to reduce overhead costs and improve operational agility.
3. Improving inventory management: 3M is targeting to reduce the number of days it holds inventory before selling it to 75 days, compared to 94 days in 2024 and 96 in 2023. This reduction will free up about $1 billion in cash, which could be returned to investors.
4. Focusing on R&D: Management is committed to rejuvenating its research and development (R&D) operations to develop new product introductions (NPIs), aiming to improve 3M's long-term growth rate.



These initiatives are expected to result in margin expansion, with CFO Monish Patolawala believing they will lead to "200 basis points to 300 basis points of margin expansion that you should see on an annualized steady-state basis."

But what about 3M's end markets? While they remain mixed, the company is making progress in expanding margins and laying the groundwork for future growth. Moreover, management's guidance calls for further operating margin improvement to 22.7%-23.3% in 2025, giving confidence that 3M is on the medium-term track to margin improvement.

In conclusion, 3M's turnaround is off to a good start, and the company's restructuring plan, along with its focus on R&D and margin expansion, makes it a compelling buy for 2025 and beyond. As an investor, you should consider adding 3M to your portfolio, as the company's strong fundamentals and growth prospects make it an attractive long-term investment.