3M Shares Drop After Q4 EPS Miss As Macro Headwinds Weigh; Downsizes Manufacturing Roles

·2 min read
  • 3M Co (NYSE: MMM) reported fourth-quarter FY22 sales of $8.08 billion, a decline of 6% year-over-year, beating the consensus of $8.04 billion.

  • Organic sales grew 0.4%, which included a 2.6% headwind from the combined impact of China's COVID-related lockdowns and decline in disposable respirator demand.

  • Adjusted EPS of $2.28 missed the consensus of $2.36.

  • Adjusted operating margin fell by 90 bps to 19.1%. Adjusted free cash flow grew 3% Y/Y to $1.7 billion.

  • Chair and CEO Mike Roman said, "The slower-than-expected growth was due to rapid declines in consumer-facing markets – a dynamic that accelerated in December – along with significant slowing in China due to COVID-related disruptions. As demand weakened, we adjusted manufacturing output and controlled costs, which enabled us to improve inventory levels."

  • "We expect macroeconomic challenges to persist in 2023," Roman continued. "Our focus is executing the actions we initiated in 2022 and delivering the best performance for customers and shareholders. Based on what we see in our end markets, we will reduce approximately 2,500 global manufacturing roles – a necessary decision to align with adjusted production volumes."

  • In December 2022, 3M shared plans to exit per- and polyfluoroalkyl substance (PFAS) manufacturing by the end of 2025.

  • Related3M Plans To Exit PFAS Manufacturing By 2025 End; Expects Up To $2.3B In Charges

  • FY23 Outlook: 3M sees -6 to -2 percent adjusted total sales growth and -3 percent to flat adjusted organic sales growth.

  • The company expects adjusted EPS of $8.50 - $9.00 versus 2022 of $9.88 on a comparable basis.

  • Price Action: MMM shares are trading lower by 3.04% at $118.89 in the premarket on the last check Tuesday.

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