Citigroup raises 3M (MMM.US) target price to $188, with new businesses such as data centers supporting long-term growth

According to news from Zhihu Finance APP, Citi has raised its target price for 3M (MMM.US) from $183 to $188 in its latest research report, maintaining a “Neutral” rating. Based on the closing price of $171.37 on October 20, this implies a stock price return of approximately 9.7%. Adding an expected dividend yield of 1.8%, the total expected return is around 11.5%. Citi believes that 3M’s third-quarter performance and management’s confidence in the preliminary 2027 targets reinforce the view that its commercial execution and ongoing internal improvement initiatives are progressing steadily, which is expected to support sustained earnings per share growth.

Orders and Backlog Support Guidance; Visibility for 2027 Framework

Citi points out that while 3M’s end-market demand trends may remain mixed through 2027, strong order activity and a steadily growing backlog offer visibility for the 2026 guidance and put the company in a favorable position to achieve its 2027 financial framework. 3M is shifting towards and expanding into relatively high-growth verticals, including data centers, semiconductors, and aerospace, which could further accelerate the company’s growth potential.

Soft Demand in Consumer and Electronics; Cost Inflation Remains a Headwind

Citi also highlights that weak demand in the consumer and consumer electronics markets could modestly restrain 3M’s growth outlook in the short term. Cost inflation remains a headwind and a variable requiring ongoing attention. However, Citi believes 3M is pursuing a strategic and proactive approach to pricing, including enhancing pricing power through new product launches and improved delivery rates; these initiatives, combined with other productivity and cost actions, should support margin expansion.

Incremental Profit Margin Expected at Around 40%; Healthy Free Cash Flow

Citi believes 3M still has multiple levers, including productivity and cost actions, factory consolidation, and sales leverage, which are expected to enable the company to achieve around a 40% incremental profit margin, at the high end of the company’s 30% to 40% guidance range. At the same time, the 2026 free cash flow guidance is about $4.8 billion. Healthy cash flow generation should continue to support disciplined capital deployment, including share buybacks and strategic investments. Citi sees this further enhancing earnings per share growth.