Deutsche Bank (DB) downgraded its rating on 3M Co. (NYSE:MMM) to "Hold" from "Buy" on valuation and the retirement of CEO George Buckley.
David Begleiter, an analyst at DB, said 3M's announcement today that its Board has opted not to renew Buckley's contract is also a key factor in his move to the sidelines. With the departure of the chief architect of 3M's successful innovation driven growth strategy, his conviction level on the shares has lessened, he wrote.
"While we do not consider 3M shares to be expensive, with the shares within 8% of our price target and in-line with historical absolute and relative valuation metrics, we no longer find valuation compelling," Begleiter said. "While we believe 3M's NPVI target of 40% in 2016 is achievable (and the linchpin of the 3M's 2016 sales target of $50B [5-yr CAGR: 11%]), we believe the Board's decision not to extend Mr. Buckley's term for 2 more yrs (as he sought) will make the achievement of these targets more difficult."
Begleiter has a price target of $95.00 on the stock, which is currently up 0.11% to trade at $88.07.