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Solid Demand & Cost Woes to Influence 3M's (MMM) Q2 Earnings

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3M Company MMM is scheduled to release second-quarter 2021 results on Jul 27, before market open.

The company delivered better-than-expected results in the last four quarters, with an earnings surprise of 9.85%, on average. In the last reported quarter, its earnings of $2.77 per share surpassed the Zacks Consensus Estimate of $2.25.

In the past three months, 3M’s shares have lost 0.3% as against the industry’s growth of 3.3%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let us delve deeper.

Key Factors and Estimates for Q2

Improving global macroeconomic trends and strengthening end-market demand benefited 3M in the first quarter of 2021. The same trend is likely to have continued in the second quarter and proved beneficial for its top- and bottom-line performance. Investments in growth prospects — especially personal safety, healthcare, home improvement, electronics and other markets — are likely to have aided.

Solid product offerings, focus on innovation and the digital business, and synergistic gains from acquired assets are other likely tailwinds. Notably, the demand for respirators was healthy and boosted sales by $190 million in the first quarter of 2021. Efforts to boost productivity and manage costs are likely margin drivers.

On the flip side, restructuring actions and headwinds like supply-chain disruptions, higher raw material costs, and a hike in logistic expenses are expected to have inflated costs in the quarter under review. Notably, higher logistics and raw material expenses more than offset pricing impact and lowered margins by 20 basis points (bps) and earnings by 1 cent per share in the first quarter.

For second-quarter 2021, the company expects the net impacts of inflated raw material and logistic costs, and price increases to hurt the operating margin by 75-125 bps. In addition, 3M expects pre-tax charges related to restructuring actions (announced in December 2020) of $25-$50 million for the second quarter.

On a segmental basis, the company expected healthy demand for respirators to be a driving force for Safety and Industrial. The impacts of the disruption in the semiconductor supply chain on automotive and electronics markets are likely to have been concerning for Transportation and Electronics. Healthcare is likely to have benefitted from the pandemic-induced demand for products, while it is expected to have faced challenges from low volume for healthcare elective procedures.

The Zacks Consensus Estimate for 3M’s second-quarter revenues is pegged at $8,539 million, indicating a year-over-year increase of 19% and a sequential decline of 3.5%. The consensus estimate for the company’s earnings is pegged at $2.25, suggesting year-over-year growth of 26.4% and a sequential decline of 18.8%.

On a segmental basis, the Zacks Consensus Estimate for Safety and Industrial’s sales, pegged at $3,289 million, suggests a year-over-year increase of 23.3% and a sequential fall of 1.1%. The consensus estimate of $2,206 million for Healthcare indicates growth of 20.9% and a decline of 1.9% from the respective year-ago and sequentially reported numbers. For Consumer, the consensus estimate of $1,453 million suggests a rise of 17.4% from the year-ago reported number and 5.8% from the sequential figure. The consensus estimate for Transportation and Electronics, pegged at $2,436 million, suggests year-over-year growth of 25.8% and a sequential decline of 3.8%.

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’re reported with our Earnings ESP Filter.

Earnings ESP: 3M has an Earnings ESP of +1.11%, with the Most Accurate Estimate of $2.27 above the Zacks Consensus Estimate of $2.25.

3M Company Price, Consensus and EPS Surprise

3M Company Price, Consensus and EPS Surprise
3M Company Price, Consensus and EPS Surprise

3M Company price-consensus-eps-surprise-chart | 3M Company Quote

Zacks Rank: The company currently carries a Zacks Rank #2.

Other Stocks to Consider

Here are some other companies that you may want to consider as according to our model, these have the right combination of elements to post an earnings beat this quarter:

Flowserve Corporation FLS has an Earnings ESP of +3.58% and it currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

ITT Inc. ITT has an Earnings ESP of +1.67% and it carries a Zacks Rank #2 at present.

IDEX Corporation IEX presently has an Earnings ESP of +0.20% and a Zacks Rank #3.


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IDEX Corporation (IEX) : Free Stock Analysis Report

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