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The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at $1.66 per share, reflecting a decline of 2.9% in the past 60 days. The consensus mark implies a 23.5% decline from the year-ago actual. The Zacks Consensus Estimate for second-quarter 2024 revenues is pegged at $5.89 billion, suggesting a 29.3% decrease from the year-ago actual.
It is worth noting that in April 2024, 3M completed the spin-off of its Health Care business into a separate public company. Notably, the spin-off is likely to have weighed on MMM’s year-over-year top-line comparison in the quarter.
Estimate Movement
Image Source: Zacks Investment Research
Despite the unfavorable impacts of the Health Care spin-off, the company’s second-quarter performance is likely to have benefited from strength across its end markets, increase in channel inventory, solid operational execution and spending discipline.
3M has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, the average beat being 16.4%. In the last reported quarter, the company delivered an earnings surprise of 14.9%.
Earnings Surprise History
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for 3M this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Strength in 3M’s Transportation and Electronics segment, driven by solid demand across transportation, automotive and aerospace, and commercial branding end markets, is likely to have supplemented the top-line performance in the second quarter. Continued channel inventory normalization, supported by the stabilization of electronics demand, is likely to have boosted its performance.
Also, strong momentum in the automotive electrification market and an increase in automotive OEM (original equipment manufacturer) build rates are expected to have been tailwinds for the segment in the quarter.
3M is also expected to have benefited from its restructuring actions, including headcount reduction, which are likely to have reduced costs and improved margins in the second quarter. The company’s operational execution, restructuring savings and spending discipline are likely to have positively impacted its results.
Despite the positives, 3M has been coping with softness in the Safety and Industrial segment. Tepid demand in businesses such as personal safety, industrial specialties, electrical markets, abrasives and automotive aftermarket is likely to have affected the segment’s performance.
Weakness in the consumer retail end markets due to soft consumer discretionary spending is anticipated to have been another spoilsport. Notably, there has been a particular softness in the company’s packaging materials, home and auto care, home improvement and consumer safety businesses.
Price Performance & Valuation
MMM shares have exhibited an uptrend in the past three months, leaving behind its peers and the Zacks Diversified Operations industry. The conglomerate giant’s shares have risen 13.8%, outperforming the industry’s and the S&P 500’s growth of 3.6% and 10%, respectively. The company’s peers Honeywell International Inc. (HON - Free Report) , Danaher Corporation (DHR - Free Report) and ITT Inc. (ITT - Free Report) have gained 11.6%, 5.5% and 8.6%, respectively, in the same period.
MMM Outperforms Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
With a forward 12-month price-to-earnings of 13.91X, which is below the industry average of 15.05X, the stock presents a potentially attractive valuation for investors. Also, the stock is trading well below the S&P 500’s average of 21.71X.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
3M's robust and diversified portfolio, encompassing industrial abrasives, automotive components, electrical products and packaging materials, along with the strength in the Transportation and Electronics segment, are likely to drive the company. We are also optimistic about its restructuring actions, which are expected to reduce its operational costs, and improve margins and cash flow in the long term. These actions are expected to yield annual pre-tax savings of $700-$900 million. To add to its strengths, MMM continues to reward shareholders with substantial dividends and share repurchases, supported by a strong cash flow and operational excellance.
However, weakness in the Safety and Industrial segment, along with tepid demand in the consumer retail end markets, has been concerning for its near-term performance. Also, a high debt level, if not controlled, might be a drag on 3M’s profitability. Its debt increased significantly as a result of Solventum's (3M’s spun-off healthcare business) issuance of $8.4 billion in aggregate principal amount of debt.
Final Thoughts
Despite 3M being attractively valued and having strong fundamentals, the company has been witnessing some near-term challenges. Investors should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains. Therefore, it might be prudent to wait for MMM’s earnings report before making an investment decision.
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3M (MMM) Stock Before Q2 Earnings: To Buy or Not to Buy?
3M Company (MMM - Free Report) is scheduled to release second-quarter 2024 results on Jul 26, before market open.
The Zacks Consensus Estimate for second-quarter 2024 earnings is pegged at $1.66 per share, reflecting a decline of 2.9% in the past 60 days. The consensus mark implies a 23.5% decline from the year-ago actual. The Zacks Consensus Estimate for second-quarter 2024 revenues is pegged at $5.89 billion, suggesting a 29.3% decrease from the year-ago actual.
It is worth noting that in April 2024, 3M completed the spin-off of its Health Care business into a separate public company. Notably, the spin-off is likely to have weighed on MMM’s year-over-year top-line comparison in the quarter.
Estimate Movement
Image Source: Zacks Investment Research
Despite the unfavorable impacts of the Health Care spin-off, the company’s second-quarter performance is likely to have benefited from strength across its end markets, increase in channel inventory, solid operational execution and spending discipline.
3M has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in the trailing four quarters, the average beat being 16.4%. In the last reported quarter, the company delivered an earnings surprise of 14.9%.
Earnings Surprise History
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model predicts an earnings beat for 3M this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
3M Company Price and EPS Surprise
3M Company price-eps-surprise | 3M Company Quote
MMM has an Earnings ESP of +2.85% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Quarterly Performance
Strength in 3M’s Transportation and Electronics segment, driven by solid demand across transportation, automotive and aerospace, and commercial branding end markets, is likely to have supplemented the top-line performance in the second quarter. Continued channel inventory normalization, supported by the stabilization of electronics demand, is likely to have boosted its performance.
Also, strong momentum in the automotive electrification market and an increase in automotive OEM (original equipment manufacturer) build rates are expected to have been tailwinds for the segment in the quarter.
3M is also expected to have benefited from its restructuring actions, including headcount reduction, which are likely to have reduced costs and improved margins in the second quarter. The company’s operational execution, restructuring savings and spending discipline are likely to have positively impacted its results.
Despite the positives, 3M has been coping with softness in the Safety and Industrial segment. Tepid demand in businesses such as personal safety, industrial specialties, electrical markets, abrasives and automotive aftermarket is likely to have affected the segment’s performance.
Weakness in the consumer retail end markets due to soft consumer discretionary spending is anticipated to have been another spoilsport. Notably, there has been a particular softness in the company’s packaging materials, home and auto care, home improvement and consumer safety businesses.
Price Performance & Valuation
MMM shares have exhibited an uptrend in the past three months, leaving behind its peers and the Zacks Diversified Operations industry. The conglomerate giant’s shares have risen 13.8%, outperforming the industry’s and the S&P 500’s growth of 3.6% and 10%, respectively. The company’s peers Honeywell International Inc. (HON - Free Report) , Danaher Corporation (DHR - Free Report) and ITT Inc. (ITT - Free Report) have gained 11.6%, 5.5% and 8.6%, respectively, in the same period.
MMM Outperforms Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
With a forward 12-month price-to-earnings of 13.91X, which is below the industry average of 15.05X, the stock presents a potentially attractive valuation for investors. Also, the stock is trading well below the S&P 500’s average of 21.71X.
Price-to-Earnings (Forward 12 Months)
Image Source: Zacks Investment Research
Investment Thesis
3M's robust and diversified portfolio, encompassing industrial abrasives, automotive components, electrical products and packaging materials, along with the strength in the Transportation and Electronics segment, are likely to drive the company. We are also optimistic about its restructuring actions, which are expected to reduce its operational costs, and improve margins and cash flow in the long term. These actions are expected to yield annual pre-tax savings of $700-$900 million. To add to its strengths, MMM continues to reward shareholders with substantial dividends and share repurchases, supported by a strong cash flow and operational excellance.
However, weakness in the Safety and Industrial segment, along with tepid demand in the consumer retail end markets, has been concerning for its near-term performance. Also, a high debt level, if not controlled, might be a drag on 3M’s profitability. Its debt increased significantly as a result of Solventum's (3M’s spun-off healthcare business) issuance of $8.4 billion in aggregate principal amount of debt.
Final Thoughts
Despite 3M being attractively valued and having strong fundamentals, the company has been witnessing some near-term challenges. Investors should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains. Therefore, it might be prudent to wait for MMM’s earnings report before making an investment decision.