JPMorgan Upgrades DuPont (DD) to Overweight and Downgrades 3M (MMM) to Neutral

October 4, 2021 10:27 AM EDT
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Price: $72.21 +0.19%

Rating Summary:
    17 Buy, 16 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 15 | Down: 25 | New: 90
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Shares of DuPont de Nemours (NYSE: DD) are up 3% on the day after JPMorgan analyst Stephen Tusa upgraded to Overweight from Neutral.

In a preliminary 2022 outlook on the Electrical Equipment & Multi-Industry sector, Tusa notes the industry looks “too expensive.”

“While in the past low interest rates underpinned a high market multiple, making the absolute multiple of the group look less expensive, the 117% premium we see today versus the market is now officially expensive, which means we are not at the “buy the group” moment. Ultimately, the call is about relative numbers and that is how we are positioned. Our top picks are HON, FTV, JCI and OTIS, and our avoids are GE, ROK, TT, LII, and PNR.,” the analyst said in a client note.

On DD, the analyst says that the first short cycle company is simply “too cheap to ignore,” given price/cost tailwinds. The price target is $85.00 per share.

“The stock has de-rated and now trades at a 30-40% discount to the group and a 10% discount to 3M, and it’s currently trading close to its lower quality chemical peers despite an improved portfolio. DD has amongst the most attractive positioning with outgrowth potential and high margins. Auto and electrics markets are now more mid cycle in profile given deferred growth related to supply constraints while price/cost is set to be a nice tailwind that is unique to the sector,” Tusa said.

The analyst also downgraded 3M after the company materially outperformed its closest peer since end-January. Moreover, the analyst says he has “little confidence in the company’s abilities to manage both environmental and operating risks.” The price target for 3M is $210.00 per share.

“We see less visibility around the environmental liabilities which seemingly continue to grow with ear-plug litigation a surprise negative this year. We also continue to struggle with quality here, as despite high margins, the company continues to see surprising de-leverage on only a modest miss in sales, a dynamic on display in 3Q21. We acknowledge the stock is cheap, though we prefer to be on the side lines with our Neutral rating,” Tusa added.

The analyst also upgraded John Bean Technologies (NYSE: JBT) to Neutral from Underweight.

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