3M Co. is scheduled to release its third-quarter earnings before the opening bell on Tuesday.
Lowered Expectations
In recent months, expectations for profit, sales, and free cash flow have declined for 3M Co. This comes after the company warned of weakness in its electronics and consumer business segments, as well as in China.
BofA Securities analyst Andrew Obin believes that expectations for the company are currently "very low." He suggests that this sets 3M Co. up to potentially surpass these low expectations.
Stock Performance
3M Co.'s stock fell 0.4% in afternoon trading on Monday, indicating that it may close at its lowest price since June 2012. Over the past three months, the stock has dropped 17.3%, while the Dow Jones Industrial Average has declined by 6%.
Analyst Estimates
Here are the average analyst estimates compiled by FactSet for several key financial metrics of 3M Co.:
Adjusted earnings per share are projected to be $2.34, compared to $2.69 in the same period last year. The FactSet EPS consensus has dropped from $2.50 since the end of June, with most of the decline occurring after 3M Co. reported its second-quarter results in late July.
Sales are expected to decrease to $7.99 billion from $8.62 billion last year. The FactSet consensus at the end of June was $8.26 billion. However, in mid-September, Chief Financial Officer Monish Patolawala stated at the Morgan Stanley Laguna Conference that revenue was now projected to be in the range of $7.9 billion to $8.0 billion, compared to the previous guidance of "approximately" $8 billion.
The average analyst estimate for free cash flow has been revised down to $1.06 billion from $1.30 billion at the end of June.
Business Segments
3M's Sales Projections for Various Sectors
3M, the global manufacturing company, is expected to see a decline in sales across different sectors. Here are the projected figures for the upcoming year:
Safety and Industrial Sales
- Expected: $2.75 billion
- Down from $2.89 billion in the previous year
Health-care Sales
- Expected: $2.06 billion
- A slight decrease from $2.08 billion in the previous year
Transportation and Electronics Sales
- Forecasted: $1.84 billion
- A significant drop from $2.24 billion in the previous year
Consumer Sales
- Estimated: $1.35 billion
- A decrease from $1.41 billion in the previous year
Despite consistently beating adjusted profit and sales expectations in the past 12 quarters, 3M's stock has frequently fallen on the day of quarterly reports. On average, it has dropped by 2.3% for seven out of twelve quarters, based on FactSet data. However, there have been five instances where the stock rose, with an average gain of 2.8%.
Analyst BofA's Obin suggests that due to low investor expectations, an earnings-per-share (EPS) beat should generate a positive response in stock prices.
Wall Street has adjusted its expectations for 3M due to several factors. In September, CFO Patolawala noted a significant slowdown in the electronics and consumer markets, as well as sluggishness in China during the third quarter.
Additionally, 3M has encountered legal challenges, resulting in substantial financial setbacks. The company allocated $10.3 billion in the second quarter for a proposed settlement related to claims regarding per- and polyfluoroalkyl substances (PFAS), commonly known as "forever chemicals," found in drinking water.
Moreover, 3M agreed to pay up to $6 billion in cash and stock to settle allegations of selling defective Combat Arms earplugs to the U.S. military.
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