News

3M Company MMM reported first-quarter 2024 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate. Both the top and bottom lines (on adjusted basis) increased on a year-over-year basis.

Inside the Headlines

3M delivered adjusted earnings of $2.39 per share, surpassing the Zacks Consensus Estimate of $2.08. The metric increased from $1.97 reported in the year-ago quarter.

The company’s adjusted net sales of $7.72 billion outperformed the Zacks Consensus Estimate of $7.64 billion. The metric increased 0.5% year over year, driven by organic sales growth of 0.8%. Foreign currency translation had a negative impact of 0.6%, while acquisitions boosted the top line by 0.3%. On a GAAP basis, MMM’s net sales inched down 0.3% year over year to $8.0 billion.

Region-wise, organic sales in the Americas declined 0.9% year over year, while that in the Asia Pacific inched up 2.6%. Organic sales from businesses in Europe, the Middle East and Africa increased 3.3%.

Segmental Results

In April 2024, 3M completed the spin off its Health Care business into a separate public company. Notably, the company’s first-quarter results include the performance of Health Care unit, as the spin-off was completed after first-quarter-end.

Revenues from Safety and Industrial totaled $2.73 billion, decreasing 1.7% year over year. This was caused by a 1.4% decrease in organic revenues and negative impact of 0.3% from foreign currency translation.

Revenues from Transportation & Electronics totaled $1.82 billion, reflecting a year-over-year increase of 6.9%. The increase is attributable to a 6.7% improvement in organic sales. Acquisitions boosted segmental revenues by 1.7%, while foreign currency translation had a 1.5% negative impact.

Revenues from Health Care were $2.02 billion, up 0.3% year over year. This were driven by organic sales increase of 1%. Divestitures and foreign currency translation had negative impacts of 0.3% and 0.4%, respectively.

Revenues from the Consumer segment fell 4.3% year over year to $1.14 billion. Organic sales decreased 3.9%. Movements in foreign currencies had an adverse impact of 0.4%.

3M Company Price, Consensus and EPS Surprise

Margin Profile

In the quarter under review, 3M’s cost of sales decreased 6.2% year over year to $4.33 billion. Selling, general and administrative expenses increased 1.8% to $1.74 billion. Research, development and related expenses decreased 7.4% year over year to $437 million.

In the first quarter, 3M reported operating income of $1.50 billion compared with $1.24 billion in the year-ago period. The upside was driven by a decline in the company’s total operational expenses.

MMM’s adjusted operating income in the quarter ascended 23.7% year over year to $1.71 billion. The adjusted operating margin was 21.9% compared with 17.9% in the year-ago quarter. The adjusted tax rate in the quarter was 20.5% compared with 17.7% in the year-ago period.

Balance Sheet and Cash Flow

Exiting the first quarter, 3M had cash and cash equivalents of $10.9 billion compared with $5.9 billion at the end of December 2023. Long-term debt was $20.6 billion at the end of the reported quarter compared with $13.1 billion at the end of December 2023.

In the quarter, 3M generated net cash of $767 million from its operating activities, reflecting a decrease of 39.8% from the year-ago quarter. Capital used for purchasing property, plant and equipment decreased 21.1% to $375 million in the quarter.

Adjusted free cash flow at the end of the first quarter was $833 million, down 11.9% year over year. Adjusted free cash flow conversion was 63% at the end of the same period.

In the first three months of 2024, 3M rewarded its shareholders with $835 million in dividend payments.

2024 Guidance

MMM expects adjusted earnings in the range of $6.80-$7.30 per share. The mid-point of the guided range is $7.05, which reflects a decline from $9.24 reported in 2023.

Adjusted total sales are expected to decline 0.25% to increase 1.75%. This implies an adjusted organic sales growth of 0-2%.

3M expects its dividend payout ratio to be approximately 40% of adjusted free cash flow.

Zacks Rank & Key Picks

MMM currently carries a Zacks Rank #3 (Hold). Some better-ranked companies are discussed below:

Carlisle Companies Incorporated CSL presently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter average earnings surprise of 17%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CSL’s 2024 earnings has increased 5.8% in the past 60 days.

Ingersoll Rand plc IR currently carries a Zacks Rank of 2 (Buy). IR delivered a trailing four-quarter average earnings surprise of 15.9%.

In the past 60 days, the Zacks Consensus Estimate for Ingersoll Rand’s 2024 earnings has increased 1.6%.

Federal Signal FSS presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 10.3%.

In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 1.4%.

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