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Will 3M's (MMM) Q2 Earnings Disappoint on Cost Headwinds?

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3M Company (MMM - Free Report) is scheduled to release second-quarter 2022 earnings numbers on Jul 26, before market open.

The Zacks Consensus Estimate for 3M’s second-quarter earnings has been revised downward by 5.4% in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 13.8%.

Let’s see how things are shaping up for 3M this earnings season.

3M Company Price and EPS Surprise

3M Company Price and EPS Surprise

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

Factors to Note

Low disposable respirator sales are likely to have affected 3M’s revenues in the Safety & Industrial segment, as was the case in the previous quarter. The company expects lower respirator demand to hurt revenues by $100-$200 million in the second quarter. The Zacks Consensus Estimate for second-quarter Safety & Industrial segment revenues indicates a 10.4% decline from the year-ago reported number.

Supply-chain disruptions, particularly for semiconductor chips,are impacting 3M’s production volumes in the electronics and automotive OEM markets. This is likely to have hurt the company’s bottom-line performance in the to-be-reported quarter.

Given 3M’s substantial international presence, foreign-exchange-related headwinds might have hurt its second-quarter performance.

Raw material and logistics cost inflation, as well as labor market challenges are expected to have impeded 3M’s bottom line in the soon-to-be-reported quarter. The company expects logistics/raw-material-related cost headwinds of $225 million for the second quarter. Pricing action in response to this cost inflation is likely to have partly offset this adversity.

Strength across 3M’s several end-markets, such as manufacturing, electronic materials, healthcare IT, home improvement, wound care and automotive/mobility are expected to have supported its top line in the second quarter. The company’s acquired assets are also likely to have driven its top line.

What Does the Zacks Model Say?

Our proven model does not conclusively predict 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 chances of beating estimates, which is not the case here, as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: 3M has an Earnings ESP of -3.68% as the Most Accurate Estimate is pegged at $2.38, lower than the Zacks Consensus Estimate of $2.47. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: 3M carries a Zacks Rank #3.

Highlights of Q1 Earnings

3M reported first-quarter 2022 adjusted earnings of $2.65 per share, which surpassed the Zacks Consensus Estimate of $2.33. This marked the company’s ninth consecutive quarterly earnings beat. 3M’s net sales of $8,829 million outperformed the Zacks Consensus Estimate of $8,740 million. While the bottom line decreased 4.3% year over year, the top line dipped 0.3% due to adverse foreign currency movements, among other factors.

Stocks to Consider

Here are some companies that you may want to consider as, according to our model, these have the right combination of elements to beat on earnings this reporting cycle.

Crane Holdings (CR - Free Report) has an Earnings ESP of +6.98% and a Zacks Rank #2. The company is slated to release second-quarter 2022 financial numbers on Jul 25.

The Zacks Consensus Estimate for Crane Holdings’ second-quarter earnings has been revised upward by 4.1% in the past 60 days. CR’s earnings have surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 22.2%.

Zebra Technologies (ZBRA - Free Report) has an Earnings ESP of +2.15% and a Zacks Rank #3. The company is scheduled to release second-quarter 2022 earnings numbers on Aug 2.

The Zacks Consensus Estimate for Zebra Technologies’ second-quarter earnings has remained steady over the past 60 days. ZBRA’s earnings have trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 8.8%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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