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What's in the Offing for 3M (MMM) This Earnings Season?

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3M Company (MMM - Free Report) is scheduled to release first-quarter 2021 results on Apr 27, before market open.

The company reported better-than-expected results in each of the trailing four quarters. Earnings surprise was a positive 5.81%, on average, for the period. In fourth-quarter 2020, its earnings of $2.38 per share surpassed the Zacks Consensus Estimate of $2.19 by 8.68%.

In the past three months, its shares have gained 18% compared with the industry’s growth of 12.5%.

Factors at Play

The impacts of the coronavirus outbreak-related headwinds on demand for its products are likely to get reflected in 3M’s first-quarter results. Notably, challenging conditions, particularly in the healthcare, automotive aftermarket, abrasives, closure and oral care elective procedures end markets, are expected to have adversely impacted its top-line performance in the first quarter.

Also, 3M’s research and development expenses were high at $456 million in fourth-quarter 2020. This trend is likely to have continued in the first quarter as well, given its focus on investing heavily in research and development of products to hold its position in the highly competitive market. This might have hurt its margins and profitability in the quarter under review. In addition, the company’s restructuring actions planned in December 2020 are expected to have resulted in pre-tax charges in the first quarter.

Further, given 3M’s diverse geographic presence, its operations are subject to macroeconomic challenges, geopolitical issues and forex woes. Notably, in fourth-quarter 2020, foreign currency adversely impacted its operating margin by 10 basis points. A stronger U.S. dollar might have hurt its overseas business in first-quarter 2021.

However, strength across its semiconductor, personal safety, home improvement, biopharma filtration, home cleaning and data center end markets is anticipated to have boosted first-quarter top-line performance. In particular, the hike in demand for respirators owing to the pandemic is likely to have boosted its sales significantly in the first quarter. In addition, it is likely to have witnessed synergistic gains from acquisitions.

On a segmental basis, the Zacks Consensus Estimate for Safety and Industrial’s sales, pegged at $3,197 million, suggests growth of 8.9% and 1.8% from the year-ago and quarter-ago reported figures, respectively. The consensus estimate for Healthcare’s sales is pegged at $2,143 million, indicating growth of 1.9% from the year-ago figure but a decline of 5.1% from the quarter-ago reported number. For Consumer, the Zacks Consensus Estimate is $1,337 million, suggesting a rise of 6.4% year over year but a decline of 6.2% sequentially. Transportation and Electronics’ consensus estimate, pegged at $2,313 million, suggests year-over-year growth of 3.4% and a sequential fall of 1.1%.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase 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.

But that is not the case here as we will see below.

Earnings ESP: 3M has an Earnings ESP of +0.81% as the Most Accurate Estimate is pegged at $2.27, higher than the Zacks Consensus Estimate of $2.25.

3M Company Price and EPS Surprise

3M Company Price and EPS Surprise

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

Zacks Rank: The company carries a Zacks Rank #4 (Sell).

Key Picks

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

Deere & Company (DE - Free Report) has an Earnings ESP of +1.13% and it currently sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation (CFX - Free Report) has an Earnings ESP of +0.68% and a Zacks Rank #3.

ITT Inc. (ITT - Free Report) has an Earnings ESP of +3.73% and Zacks Rank #3.

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