A month has gone by since the last earnings report for 3M (MMM Quick QuoteMMM - Free Report) . Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is 3M due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

3M Q1 Earnings Beat Estimates, Rise Y/Y on Solid Sales

3M has delivered impressive results for the first quarter of 2021. Its earnings surpassed estimates by 23.11% and sales exceeded the same by 5.92%.

Its adjusted earnings in the reported quarter were $2.77 per share, surpassing the Zacks Consensus Estimate of $2.25. Also, the bottom line increased 26.5% from the year-ago quarter figure of $2.19.

The results gained from a year-over-year organic volume growth/productivity (34 cents), foreign currency movements (13 cents), tax rate (14 cents) and other tailwinds (3 cents). However, price/raw material, divestitures and shares outstanding had adverse impacts of 1 cent, 3 cents and 2 cents, respectively.

Sales Details

In the quarter under review, 3M’s net sales were $8,851 million, reflecting growth of 9.6% from the year-ago quarter. Also, the company’s net sales surpassed the Zacks Consensus Estimate of $8,356 million. Respirator-related sales boosted net sales by $190 million.

Results benefitted from an 8% year-over-year increase in organic sales and a 3% gain from movements in foreign currencies. However, divestitures had a negative impact of 1.4%.

On a geographical basis, sales in the Americas increased 4.5% year over year, while that in the Asia Pacific grew 18.1%. Business in the Europe, Middle East and Africa region improved, with sales increasing 10.4% year over year.

The company reports top-line results under four business segments — including Safety & Industrial, Transportation & Electronics, Health Care, and Consumer. The segmental information is briefly discussed below.

Revenues from the Safety and Industrial segment totaled $3,327 million, increasing 13.7% year over year. The improved performance resulted from a 10.3% increase in organic sales and a 3.4% contribution from movements in foreign currencies.

Revenues from the Transportation & Electronics segment totaled $2,531 million, reflecting a year-over-year increase of 13%. Results gained from 9.8% growth in organic sales and a 3.3% contribution from movements in foreign currencies.

Revenues from the Health Care segment were $2,248 million, up 6.8% year over year. The results benefitted from a positive impact of 9.3% from organic sales and a 3.1% gain from movements in foreign currencies. However, divestitures had a negative impact of 5.6%.

Revenues from the Consumer segment increased 9.8% year over year to $1,373 million. Organic sales improved 7.8% and movements in foreign currencies had a positive impact of 2%.

Margin Profile

In the quarter under review, 3M’s cost of sales increased 10.1% year over year to $4,525 million. It represented 51.1% of net sales compared with 50.9% in the year-ago quarter. Selling, general and administrative expenses grew 2.3% year over year to $1,808 million. It represented 20.4% of net sales versus 21.9% in the year-ago quarter. Research, development and related expenses decreased 2.4% year over year to $524 million. It represented 5.9% of the quarter’s net sales.

Adjusted operating income in the quarter under review increased 18.8% year over year to $1,994 million. Operating margin increased 170 bps year over year to 22.5%. The tax rate in the quarter was 16.4% versus 20.7% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, 3M had cash and cash equivalents of $4,636 million, reflecting a slight change from $4,634 million at the end of the last reported quarter. Long-term debt balance decreased 6.5% sequentially to $16,819 million.

In the reported quarter, the company generated net cash of $1,688 million from its operating activities, reflecting an increase of 39.2% from the year-ago quarter. Capital used for purchasing property, plant and equipment decreased 6.6% year over year to $310 million. Adjusted free cash flow in the quarter was $1,391    million, up 49.4% from $931 million generated in the year-ago quarter. Adjusted free cash flow conversion was at 86%.

In the quarter, the company used $858 million for paying out dividends to shareholders and repurchased $231 million treasury shares. Notably, it paid out dividends of $847 million and repurchased shares worth $365 million in the year-ago quarter.

Outlook

For 2021, 3M reiterated its projections. Adjusted earnings are expected to be $9.20-$9.70 per share. Sales are predicted to increase 5-8% year over year, with organic sales growth of 3-6%.

The company also anticipates a cash flow of $7.1-$7.8 billion from operating activities and capital expenditure of $1.8-$2.0 billion. Free cash flow in the year is predicted to be $5.1-$6.0 billion and free cash flow conversion is expected to be 95-105%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, 3M has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 3M has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.