With just one week left of 2024, the markets are riding high. The S&P 500 is up over 25% for the year, and most analysts are expecting further gains in 2025. Watching the situation, JPM’s chief US equity strategist Dubravko Lakos-Bujas has noted several factors buttressing the US markets.
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“US equities should remain supported by the expanding business cycle,” Lakos-Bujas says, and adds, “US Exceptionalism that is helping broaden the AI cycle and earnings growth, ongoing easing by global central banks and the wind-down of Fed’s QT in 1Q. At the same time, US households are benefiting from a tight labor market, sitting on record wealth (+$10T over the past year to ~$165T as of 2Q24, +$50T since Covid), and potentially lower energy prices. Heightened geopolitical uncertainty and the evolving policy agenda are introducing unusual complexity to the outlook, but opportunities are likely to outweigh risks… We expect continued dispersion across equities and broadening out of equity performance to segments where valuation is more supportive.”
Building on this logic, several of JPM’s 5-star analysts are recommending that investors buy into traditional value stocks – the red meat of investing. Describing two of these value stocks as ‘best idea’ picks for the coming year, they are not shy about giving high ratings. We’ve used the TipRanks platform to look up the broader Wall Street view of these stock picks. They present an interesting story that deserves a closer look.
3M (MMM)
The first value stock on our list is 3M, a company that you’re probably familiar with – at least for some of its products. 3M is a Wall Street stalwart and is listed on both the Dow Jones and the S&P 500 indexes. The company is a broad-based multinational conglomerate that manufactures and distributes a wide range of products on the global markets. 3M’s most famous product is probably the ubiquitous Post-It Note, which the company introduced in the late 1970s and which has since become a staple of offices everywhere.
In addition to its lines of office supplies, 3M also produces industrial abrasives; adhesives, sealants, and fillers; automotive parts; surface coatings; electronic materials and components; cleaning supplies; building materials; insulation; lab supplies; even dental supplies and orthotics – and that is hardly a comprehensive list. 3M, which was founded in 1902, has achieved longevity through extreme generalization. Originally known as the Minnesota Mining and Manufacturing Company, 3M is still headquartered in the state.
Looking at the stock’s performance and finances, we find that MMM shares have outperformed the broader market this year. For 2024, the stock is up 46%, well above the S&P’s gain. In its last reported financial quarter, 3Q24, 3M reported revenues of $6.1 billion, beating forecasts by $10.7 million. At the bottom line, 3M’s non-GAAP EPS came to $1.98 for Q3, 8 cents better than had been expected.
Return-minded investors can also rely on 3M’s dividend payment, which is one of the market’s most reliable. 3M has been paying out shareholder dividends for over 100 years. The last payment, sent out on December 12, was for 70 cents per common share. 3M currently has a dividend yield of 2.17%, comparing favorably to the Industrial Goods sector average of 1.39%.
Analyst Stephen Tusa, rated by TipRanks in the top 4% of Wall Street’s stock experts, covers 3M for JPM, and believes that there is plenty of reason to expect a strong upside in 2025. He writes, “3M is our top pick as a value play with idiosyncratic upside… Looking to 2025, we continue to see an outlook for 10%+ EPS growth and think revenue is more visible than most appreciate, coupled with some unique tailwinds, which include restructuring and productivity. We continue to see significant low-hanging fruit on productivity, which implies 100bps per year of gross margin improvement that should carry beyond 2025, a long-term set up that we expect to get clarity on at the coming February investor meeting, a positive catalyst.”
At the bottom line, Tusa predicts that 3M will generate solid earnings growth, and explains, “This all comes at a time when volumes should be able to show some upside cyclically (still in the early innings of a positive earnings revision cycle), and we see an upside pathway that firmly approaches $11 per share in EPS as a simple anchor – 50%+ EPS upside potential that is best in class. Even assuming a reasonable PFAS headwind, the stock appears abnormally cheap, reinforced by a 2024 FCF yield of 6.6% versus the current Sector average of 3.6.”
Tusa goes on to put an Overweight (i.e. Buy) rating on MMM shares, and complements that with a $165 price target that indicates potential for a 28% upside over the course of next year. (To watch Tusa’s track record, click here.)
JPM represents the bullish take on this stock. Overall, MMM shares have a Moderate Buy consensus rating, based on 10 recent reviews that break down to 5 Buys, 3 Holds, and 2 Sells. The stock is trading for $129.98 and its $151.67 average price target implies a one-year gain of ~18%. (See MMM stock forecast.)
TransUnion (TRU)
Dating back to 1968, the second stock on our list, TransUnion, is a leader in the credit reporting segment. The company offers consumer credit reporting services to both consumers and vendors, basing its reports on proven data science. TransUnion also offers consumer services in fraud alerts and credit disputes, and works on the vendor side in multiple industries, including financial services, insurance, communications, media, gaming, and the automotive sector. TransUnion offers a basic free service, as well as a premium service available through subscription.
On the business side, TransUnion’s services include marketing and consumer engagement, as well as fraud prevention and investigation and risk management. The company is well-known for its data analytic expertise.
The company is making a concerted move to modernize its business and has developed the OneTru platform, a unified tech solution to enable customers to manage, govern, analyze, and deliver credit insights. The platform enables clear identity resolution and is adaptable to a frequently changing regulatory environment.
TransUnion last reported financials for 3Q24 and beat the expectations at both the top and bottom lines. On revenue, the company generated $1.085 billion for the quarter, up 12.5% year-over-year and $24.5 million over the forecast; on earnings, the non-GAAP EPS of $1.04 represented a 14% year-over-year increase – and was 3 cents per share better than had been anticipated.
For JPM’s Andrew Steinerman, another 5-star analyst, a key point here is TransUnion’s ability to meet its stated objectives while generating value for shareholders. He says of the company, “We continue to view TRU as a compelling relative value stock. The valuation on TRU shares at 24x 2025E EPS remains below peer EFX at 33x and the Info Services sector median of 30x. Historically, TRU had traded above EFX and the Info Services sector median given TransUnion’s higher organic, constant currency (o/cc) revenue growth profile. The company has executed against its stated plans in 2024, and we think the stock will continue to re-rate higher as long as the team continues to deliver against expectations. We are also starting to see positive signs of improvement in consumer credit activity and marketing activity.”
Looking ahead, Steinerman goes on to note how the OneTru platform, as an adaptation to today’s tech, is likely to improve the firm’s position, and gives his outlook on the near-term: “Next year should be an important one for TransUnion as it works towards completing its transformation program, which involves modernizing its technology by migrating additional data onto its OneTru platform and launching enhanced product capabilities on OneTru. In addition, we anticipate that the firm’s Consumer Interactive business will turn a corner towards positive growth in 2025. We see management remaining disciplined on capital allocation.”
The analyst puts an Overweight (Buy) rating on the stock, with a $124 price target that suggests a one-year upside potential of 31%. (To watch Steinerman’s track record, click here.)
This stock’s Moderate Buy consensus rating is supported by 13 Wall Street reviews, based on 9 Buys and 4 Holds. The stock is priced at $94.34, and its $120.25 average target price implies ~27% gains in the coming year. (See TRU stock forecast.)
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
