It has been a hard couple of years for 3M Co. (NYSE: MMM), as the conglomerate went from the favorite of Wall Street to the junk bin with a series of earnings disappointments and a very poor explanation of why things were so bad. 3M shares traded under $130 during March’s panic selling, a level that was half of its peak stock price at the start of 2018. With earnings behind it, some investors have to be wondering if 3M is finally setting up for a major recovery.

The conglomerate reported first-quarter adjusted earnings of $2.16 per share. That was down 3% from the first quarter of 2019, but it still managed to beat the consensus expectations of $2.03. With flat revenues, 3M’s adjusted EBITDA rose by 3%, and its adjusted EBITDA margin increased by 10 basis points to 26.2%. 3M’s $900 million in free cash flow was also up 40% from a year earlier.

3M is seeing a mixed impact from the COVID-19 recession. Some pockets of strength are seen in personal safety products (masks and the like), cleaning, food safety, home improvement and biopharma filtration. Social distancing and stay-at-home trends have brought considerable weakness in the oral care, automotive products, commercial solutions, industrial and office-related products.

3M’s stock has been challenging for growth investors and value investors alike. The question now is whether the post-coronavirus opportunities give the company a solid leg up over some other conglomerates. If that is the case, its relatively high valuations may prove to have been underestimating its upside for earnings and revenues ahead. That also may allow 3M to continue on its endless dividend hikes.

Most analysts on Wall Street remain very cautious when it comes to 3M. After all, every time they defended the stock for the past two years, long before anyone knew about COVID-19, they were punished.

3M shares were trading near $147 at the end of last week, but they have risen to a post-earnings close of $157.61 as of Tuesday. Even with a slight drop on Wednesday, 3M shares have managed to hit $160 for two days in a row, and that’s the highest share price since February 20.

Credit Suisse has been among the positive firms, with an Outperform rating. John Welsh raised his target price to $180 from $165. His view is that 3M can deliver higher earnings in 2021 than 2019. While tailwinds likely will be offset by variable cost actions as organic sales growth returns, Welsh identified several tailwinds:

1) additional carryover restructuring savings from 2019 actions;
2) incremental demand for respirators;
and 3) EPS accretion from the acquisition of Acelity

CFRA raised 3M to Buy from Hold on April 28, and it raised its price target to $177 from $164. Its report said:

We expect industrial end markets to be weak throughout 2020, but see demand for Health Care products and Covid-related protective equipment limiting 2020’s revenue decline to -6% YoY, much better than the downturn the broader economy will face, in our view. Effective cost cutting (COGS and SG&A both down 5% YoY or more in Q1) will also contribute to strong earnings performance vs. the S&P 500 over the next year, in our view.

BofA Securities reiterated its Buy rating and raised its price objective to $170 from $165. On top of cost cuts adding to earnings in 2020, despite 3M withdrawing its guidance due to uncertainty, the firm sees increasing N95 respirator capacity driving the train here. The report said:

A spike in demand for N95 respirators has put 3M at the forefront of corporate response to COVID-19. In April, the company doubled monthly respirator production to 100 million. Annual capacity is on track to double further to approximately 2 billion by year-end. Management expects respirators to contribute 150 basis points to second quarter organic revenue growth… 3M is one of few vertically-integrated manufacturers. 3M has been working closely with the federal government to increase U.S. production. The Department of Defense recently awarded the company a $76 million contract to expand respirator production.

RBC Capital Markets has been among the more cautious firms covering 3M, but even with a Sector Perform rating, it raised its target to $148 from $143.

Deutsche Bank reiterated its Buy rating and raised 3M’s price target to $163 from $158.

Independent research firm Argus maintained its Hold rating near term, but it does have a Buy rating when considering a five-year horizon. Argus is simply looking for a more favorable entry point after 3M has delivered inconsistent earnings in recent quarters.

Mike Roman, 3M board chair and chief executive officer, said along with earnings earlier this week:

In this unprecedented time, I could not be more proud of how our 96,000 people have stepped up to help fight COVID-19, and I thank all 3Mers for their incredible efforts. We are attacking the pandemic from all angles, which includes mobilizing all of our resources and rapidly increasing output of critical supplies to healthcare workers and first responders.

Given the breadth and diversity of our businesses, the financial impact of COVID-19 is varying across 3M. In the first quarter we saw strong growth in personal safety, as well as in other areas of our portfolio experiencing high demand due to the pandemic. At the same time, we experienced weak demand in several end markets that were more severely impacted by actions taken around the world to slow the pandemic. Looking ahead, 3M is taking action that will help us navigate near-term uncertainty, generate strong cash flow, and lead out of the slowdown by delivering for employees, customers and shareholders.

3M stock traded down almost 0.4% at $157.00 on Wednesday morning, which is about $9.00 above its consensus price target. The 52-week trading range is $114.04 to $189.71, and the dividend yield is now about 3.7%.

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