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3M (MMM) Shares Decline 13% in 6 Months on Multiple Headwinds
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3M Company’s (MMM - Free Report) shares have declined 13% in the past six months, underperforming the industry’s 3.8% increase. Foreign-exchange woes, raw material and logistics cost inflation, supply-chain disruptions and lower disposable respirator demand have primarily weighed on the company’s shares.
Image Source: Zacks Investment Research
Within the Safety and Industrial segment, softness in disposable respirator demand is hurting 3M’s personal safety business. In the third quarter of 2022, lower disposable respirator demand impacted organic sales by $130 million. For the fourth quarter, the company expects a headwind of $150-$200 million from lower disposable respirator demand.
The Transportation & Electronics unit is experiencing weakness due to a decline in consumer electronics demand, particularly for smartphones, tablets and TVs. This can be attributed to continued inflationary pressure, which is impacting consumer spending. Semiconductor supply-chain constraints are also weighing on the unit’s performance. Reduced consumer spending is also hurting the Healthcare and Consumer segments performances. Within the Healthcare unit, the oral care business is experiencing softness.
Raw material and logistics cost inflation are affecting 3M’s bottom-line performance. Cost woes impacted the company’s earnings by 31 cents per share in the third quarter. For the fourth quarter, the company expects a headwind of approximately $100-$150 million from high raw materials and logistics costs.
Given 3M’s substantial international presence, it is exposed to the impacts of adverse foreign currency movements. Strengthening U.S. dollar hurt the company’s sales by 5% in the third quarter. This headwind, as well as uncertainty surrounding the economy, has forced MMM to reduce its full-year forecast. The company now anticipates total sales to decline 3-3.5% year over year in 2022 compared with the prior prediction of a decrease of 0.5-2.5%. The company expects organic sales growth of 1.5-2% in the year compared with 1.5-3.5% expected earlier. Foreign currency translation is expected to impact sales by 4.5% in 2022 compared with 4% anticipated earlier. 3M expects adjusted earnings of $10.10-$10.35 for 2022 compared with $10.30-$10.80 estimated earlier.
Zacks Rank & Key Picks
3M currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked companies for your consideration:
Enerpac Tool’s estimated earnings growth rate for the current fiscal year is 44.6%. Shares of the company have jumped 27.5% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 24.8%, on average.
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. Shares of the company have gained 18.4% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IDEX pulled off a trailing four-quarter earnings surprise of 5.7% on average.
IDEX has an estimated earnings growth rate of 28.3% for the current year. Shares of the company have rallied 23% in the past six months.
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3M (MMM) Shares Decline 13% in 6 Months on Multiple Headwinds
3M Company’s (MMM - Free Report) shares have declined 13% in the past six months, underperforming the industry’s 3.8% increase. Foreign-exchange woes, raw material and logistics cost inflation, supply-chain disruptions and lower disposable respirator demand have primarily weighed on the company’s shares.
Image Source: Zacks Investment Research
Within the Safety and Industrial segment, softness in disposable respirator demand is hurting 3M’s personal safety business. In the third quarter of 2022, lower disposable respirator demand impacted organic sales by $130 million. For the fourth quarter, the company expects a headwind of $150-$200 million from lower disposable respirator demand.
The Transportation & Electronics unit is experiencing weakness due to a decline in consumer electronics demand, particularly for smartphones, tablets and TVs. This can be attributed to continued inflationary pressure, which is impacting consumer spending. Semiconductor supply-chain constraints are also weighing on the unit’s performance. Reduced consumer spending is also hurting the Healthcare and Consumer segments performances. Within the Healthcare unit, the oral care business is experiencing softness.
Raw material and logistics cost inflation are affecting 3M’s bottom-line performance. Cost woes impacted the company’s earnings by 31 cents per share in the third quarter. For the fourth quarter, the company expects a headwind of approximately $100-$150 million from high raw materials and logistics costs.
Given 3M’s substantial international presence, it is exposed to the impacts of adverse foreign currency movements. Strengthening U.S. dollar hurt the company’s sales by 5% in the third quarter. This headwind, as well as uncertainty surrounding the economy, has forced MMM to reduce its full-year forecast. The company now anticipates total sales to decline 3-3.5% year over year in 2022 compared with the prior prediction of a decrease of 0.5-2.5%. The company expects organic sales growth of 1.5-2% in the year compared with 1.5-3.5% expected earlier. Foreign currency translation is expected to impact sales by 4.5% in 2022 compared with 4% anticipated earlier. 3M expects adjusted earnings of $10.10-$10.35 for 2022 compared with $10.30-$10.80 estimated earlier.
Zacks Rank & Key Picks
3M currently carries a Zacks Rank #3 (Hold).
Here are some better-ranked companies for your consideration:
Enerpac Tool Group Corp. (EPAC - Free Report) delivered an average four-quarter earnings surprise of 3.4%. EPAC presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
Enerpac Tool’s estimated earnings growth rate for the current fiscal year is 44.6%. Shares of the company have jumped 27.5% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 24.8%, on average.
Applied Industrial has an estimated earnings growth rate of 14.3% for the current fiscal year. Shares of the company have gained 18.4% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IDEX pulled off a trailing four-quarter earnings surprise of 5.7% on average.
IDEX has an estimated earnings growth rate of 28.3% for the current year. Shares of the company have rallied 23% in the past six months.