3M (MMM) Beats on Q3 Earnings & Revenues, Revises '23 View
3M Company’s MMM third-quarter 2023 adjusted earnings (excluding $6.42 from non-recurring items) of $2.68 per share surpassed the Zacks Consensus Estimate of $2.34.
3M’s net sales of $8,312 million outperformed the Zacks Consensus Estimate of $7,952.7 million. However, the top line declined 3.6% year over year due to a 3.7% decrease in organic sales. Foreign currency translation had a positive impact of 0.6%, while divestitures hurt the top line by 0.5%.
Region-wise, sales in the Americas inched up 0.6% year over year, while that in the Asia Pacific declined 15.6%. Sales from business in Europe, the Middle East and Africa climbed 3.9%.
3M Company Price, Consensus and EPS Surprise
3M Company price-consensus-eps-surprise-chart | 3M Company Quote
Segmental Results
The company reports top-line results under four business segments — Safety & Industrial, Transportation & Electronics, Health Care and Consumer.
Revenues from Safety and Industrial totaled $2,751 million, decreasing 4.9% year over year. The decline can be attributed to a 5.8% decrease in organic revenues. The Zacks Consensus Estimate for Safety and Industrial segment revenues was pegged at $2,778 million.
Revenues from Transportation & Electronics totaled $2,171 million, reflecting a year-over-year decrease of 3%. The decline is attributable to a 4.1% decrease in organic sales. Acquisitions boosted segmental revenues by 1.4%, while divestitures had a 0.4% negative impact. The Zacks Consensus Estimate for Transportation & Electronics segment revenues was pegged at $2,043 million.
Revenues from Health Care were $2,073 million, down 0.2% year over year. The results were hurt by a 3.4% negative impact from divestitures. Organic sales climbed 2.4%. The Zacks Consensus Estimate for Health Care revenues was pegged at $2,035 million.
Revenues from the Consumer segment fell 6.7% year over year to $1,315 million. Organic sales decreased 5.4%. Movements in foreign currencies had a negative impact of 0.6%. The Zacks Consensus Estimate for Consumer segment revenues was pegged at $1,401 million.
Margin Profile
In the quarter under review, 3M’s cost of sales decreased 3.1% year over year to $4,580 million. Selling, general and administrative expenses jumped more than 100% to $5,992 million. Research, development and related expenses decreased 6.7% year over year to $430 million.
In the third quarter, 3M reported an operating loss of $2.65 billion against the operating income of $4.16 billion in the year-ago period. The downside was due to pre-tax charges of $4.2 billion related to its settlement of Combat Arms lawsuits.
MMM’s adjusted operating income in the quarter ascended 3.8% year over year to $1,859 million. The adjusted operating margin was 23.2% compared with 21.6% in the year-ago quarter. The adjusted tax rate in the quarter was 18.1% compared with 15.9% in the year-ago period.
Balance Sheet and Cash Flow
Exiting the third quarter, 3M had cash and cash equivalents of $5,140 million compared with $3,655 million at the end of December 2022. Long-term debt was $12,876 million at the end of the third quarter compared with $14,001 million at the end of December 2022.
At the end of the third quarter, 3M generated net cash of $4,694 million from its operating activities, reflecting an increase of 27.9% from the year-ago quarter. Capital used for purchasing property, plant and equipment increased 1.1% to $1.26 billion in the first nine months of 2023.
Adjusted free cash flow at the end of the third quarter was $4,339 million, up 36.8% year over year. Adjusted free cash flow conversion was 115% at the end of the same period.
In the first nine months of 2023, 3M rewarded its shareholders with $2.48 billion in dividend payments. The company did not repurchase shares in the third quarter.
2023 EPS Guidance Raised
Following robust year-to-date performance and due to strong operational execution, 3M has raised its adjusted earnings guidance for 2023. The company expects adjusted earnings of $8.95-$9.15 per share for the current year compared with $8.60-$9.10 anticipated earlier. The mid-point of the guided range — $9.05 — lies above the Zacks Consensus Estimate of $8.93.
Adjusted total sales are expected to decline approximately 5% compared with a decline of 1-5% anticipated earlier. This implies an adjusted organic sales decline of around 3%.
3M estimates adjusted operating cash flow of $6.5-$6.9 billion compared with $5.9-$6.3 billion anticipated earlier.
Zacks Rank & Key Picks
3M currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked stocks from the Industrial Products sector:
Applied Industrial Technologies AIT flaunts a Zacks Rank #1 (Strong Buy) at present. The company delivered a trailing four-quarter earnings surprise of 15%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Applied Industrial has an estimated earnings growth rate of 4.3% for the current fiscal year. The stock has gained 33.4% in a year.
Axon Enterprise AXON carries a Zacks Rank #2 (Buy) at present. The company pulled off a trailing four-quarter earnings surprise of 60.2%, on average.
Axon has an estimated earnings growth rate of 62.1% for the current year. The stock has surged around 52.4% in a year.
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3M Company (MMM) : Free Stock Analysis Report
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