Goldman Sachs downgraded 3M (MMM), which makes a wide variety of products, to Sell from Neutral. The firm said it now prefers pure-play industrial names over companies like 3M which obtain over 50% of their revenue from consumer end markets.

INDUSTRIALS BETTER POSITIONED: The shares of cyclical, industrial companies that focus on multiple sectors are poised to continue advancing in the medium term, wrote Goldman Sachs' Joe Ritchie. Revenue growth excluding acquisitions should be positive next quarter for the first time since the second quarter of 2015, the analyst predicted. Demand for the group's products "appear to be stabilizing," and oil prices "are becoming less of a headwind" for it, Ritchie wrote.

NEGATIVE CATALYSTS FOR 3M: 3M's profits may miss Street expectations, the analyst believes. The company's Electronics unit faces "challenges" as smartphone sales decelerate and more companies shift to OLED technology, according to Ritchie. Moreover, 3M's margins could be pressured by rising raw material costs as oil prices rise, and its price to earnings multiple could decline as investors shift to more cyclical industrial names, the analyst believes.

LITTLE BENEFIT FROM TRUMP: 3M probably won't benefit a great deal from the Trump administration's policies, since it has been repatriating $1B of its cash held overseas per year, has only 40% exposure to the U.S., and could be hurt by a stronger dollar, Ritchie wrote. The analyst cut his price target on 3M to $159 from $167.

WHAT'S NOTABLE: Ritchie also downgraded Illinois Tool Works (ITW) to Neutral this morning, citing a more balanced risk/reward following the recent rally. He maintained his $123 price target on the shares.

PRICE ACTION: In late morning trading, 3M lost 1% to $171.29 per share.