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3M's stock is down by about -15% compared to about -25% for Honeywell since early February. With the global economy feared to go in recession, the consumer spending power will likely decline, and 3M’s transportation and electronics segment will likely face the heat. Asia Pacific as a region accounts for roughly one-third of the company’s total sales. China in particular is expected to see slowdown in the near term, which will have an impact on 3M’s top line. While the company is manufacturing coronavirus related products, such as masks, the contribution of such products to the company’s top line will likely be less than 1%.For Honeywell, with rapid contraction of air travel, the company’s aerospace business is expected to take a hit, as the new orders could be postponed. The aerospace segment accounts for 40% of the company’s total sales. Though the company’s safety products are seeing high demand in the current crisis. The company has ramped up the production of N95 masks, among other protective gear.Given the current crisis, both the companies are likely to face pressure on their top line in 2020, which explains the drop in the stock prices. Below, we take a look at whether 3M could be a better bet compared to Honeywell by looking at their fundamental performance.
CORONAVIRUS CRISIS : Since early February, 3M stock has moved -15.3% compared to -24.7% for Honeywell International.3M's stock has declined by about 15% since early February, compared to 25% decline for Honeywell, after the WHO declared a global health emergency relating to Coronavirus.3M's stock fell 13% while Honeywell's stock fell 21% since March 8th, as the U.S. cases accelerated.
3M % Change For Key Dates: 2020 Crisis
Honeywell International % Change For Key Dates: 2020 Crisis
HISTORICAL PERFORMANCE: From 2009-2019 3M stock has grown at 0.4x the rate of Honeywell International
3M stock went from $63.25 at the end of 2009 to $174.84 at the end of 2019, representing a change of 176.4%.
During the same time period, the Honeywell International went from $30.98 to $176.05 representing a change of 468.3%.
This implies that 3M stock grew at 0.4x the rate of Honeywell International
MMM Stock Price
HON Stock Price
MMM Stock Price Annualized Rate of Return
HON Stock Price Annualized Rate of Return
ANALYSIS: Is 3M stock expensive based on a review of the fundamentals?
P/E Ratio: Based on current P/E ratios, Honeywell stock looks attractive compared to prior years and attractive compared to 3M
3M current P/E ratio of 17.0 is 1.1x that of Honeywell International P/E ratio of 15.2.
* P/E Ratio is calculated based on year end market price and trailing earnings. However, for 2020 (current) P/E, we use 2019 earnings and current market price.
Historical Revenue Growth: 3M's average revenue growth has been close to 0, but better than negative average growth for Honeywell.
3M 2014-19 annualized revenue growth of 0% compares with 2014-19 Honeywell's annualized revenue growth rate of -1.5%.
2014-19 Annualized Revenue Growth Comparison
MMM Revenue Growth
HON Revenue Growth
Historical EPS Growth: Honeywell's average annual EPS growth has been much higher than 3M, primarily due to a massive surge in 2018, as the company recorded on- time provisional charge of around $4 billion in 2017, which pushed the GAAP EPS lower.
3M 2014-19 annualized EPS growth of <1% is 0.09x that of the 2014-19 Honeywell's annualized EPS growth rate of 7.9%.
2014-19 Annualized EPS Growth Comparison
MMM EPS Growth
HON EPS Growth
Survival Check: Total Debt Comparisons
3M Total Debt has increased from $11.7 billion to $20.3 billion between 2016 and 2019. In comparison, Total Debt for Honeywell International has remained around $12.5 billion mark.
3M stock has been more resilient through the crisis, thus far, with expectations of growth from healthcare in the current crisis. Though this won't be enough to drive growth for 3M given the size of the business, 3M still appears to be a better bet as compared to Honeywell, for a larger upside when the health crisis abates. Based on historical growth, both 3M and Honeywell have seen comparable revenue growth, their P/E ratios have largely been similar of late, and both the companies have similar cash flows from operations. Honeywell stands out in one aspect that is the EPS growth. However, as we look forward, it appears Honeywell's business could be more impacted due to its aerospace division. The ongoing financial distress faced by airlines, and negative consumer sentiment on air travel will continue to weigh on the overall air travel industry in the near term, and also on Honeywell.
How Much Could 3M Be Worth Post Its Acelity Acquisition?
3M (MMM): How many days did MMM stock increase or decrease by ... or more in the last 3 months?
3M Revenue: How Does 3M Make Money?
3M Earnings: Performance and 2019 Forecast
Which Is 3M's Largest Division Among The 26 Business Divisions It Reports?
3M - MMM
Health Care Equipment & Supplies