3M stock rallies, leading Dow Jones index

3M (MMM), the Minnesota-based manufacturer of everything from Post-it Notes to chemicals, is outperforming its main index at the start of the week. 3m stock has risen 4.5% at the time of writing, while the Dow Jones Industrial Average (DJIA) gains 0.76%. The Dow Jones has been leading the other indices at the start of the week.

3M stock is benefitting from praise from JPMorgan, which upgraded shares of the manufacturing giant on Monday.

3M stock news

Stephen Tusa, a Managing Director at JPMorgan, made the rounds on CNBC on Monday after the bank upgraded its 3M price target from $160 to $165. Tusa said it was just a result of 3M continuing to improve operations after releasing quarterly earnings for the third quarter last week. JPMorgan also led the way this spring with its initial Overweight rating, which it has sustained with the new call.

“Things are going pretty well for them off of a pretty depressed level in our sector,” said Tusa on CNBC. “3M has been one of the most dramatic underperformers in our sector over the last five, six years. We think that’s bottomed with the new management team, a really compelling story around productivity and margins [...]. And 30% upside from here is just really attractive.”

Tusa said that the “wind back up” for 3M stock is probably a multi-year story. Before the fallout from its many lawsuits, 3M stock traded above $200 in 2017.

The JPMorgan banker said that annual earnings per share (EPS) were safely above $10, which should eventually push the company to trade above 20 times earnings like the rest of its competitors.

3M is recovering after agreeing to historic settlements that ended litigation involving its PFAS chemical and faulty combat earplugs used by US troops. 3M agreed to pay $12.5 billion for the chemical that polluted the US water system and $6 billion to settle the earplug case, both of which will be paid out over many years.

On October 22, 3M reported adjusted EPS of $1.98 and revenue of $6.1 billion for the third quarter. Both figures beat consensus, and GAAP EPS was $2.48.

3M stock forecast

3M stock has broken back above an extremely important topside resistance level on Monday. Beginning in January 2018, the trendline connects range highs in 2018 and 2021. Although 3M stock was in a rally, shares moved sideways once this trendline was overtaken in August.

Additionally, prior to the news from JPMorgan, 3M stock had fallen back into the oversold region of the Relative Strength Index (RSI). The RSI has jumped on Monday to 45 from Friday's 26 nadir.

MMM daily stock chart

Now that 3M has overtaken the trendline again, it probably turns into strong support. Expect a move back toward prior resistance enar $140, where 3M stock put in a double-top pattern on September 26 and October 22.