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3M (MMM) Gets Mired in Headwinds, Stock Down 27% in 6 Months
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3M Company (MMM - Free Report) is plagued by persistent weakness in the Safety and Industrial segment, inflationary pressure, supply-chain disruptions and forex woes. Due to these headwinds, shares of the company have declined 26.9% in the past six months compared with the industry’s decrease of 10.9%.
Image Source: Zacks Investment Research
Let’s delve deeper to unearth the factors that are weighing on the stock’s performance.
3M’s Safety and Industrial segment is experiencing weakness due to softness in disposable respirator demand. In the fourth quarter, lower disposable respirator demand hurt organic sales by $165 million. For 2023, the company expects an impact of $450-$550 million from this headwind. Organic sales are expected to decline in the low-single digits for the segment in 2023.
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 reduced consumer spending due to continued inflationary pressure. Reduced consumer spending is also hurting the Healthcare and Consumer segments’ performances. Weakness in the medical solutions business is weighing on the Healthcare segment’s performance.
For 2023, the company expects healthcare segment organic sales to increase in the low to mid-single digits from the year-ago period. Organic sales in the Consumer segment are predicted to decline in the low-single digits in 2023.
Raw material and logistics cost inflation as well as supply-chain disruptions, including labor shortages, are affecting 3M’s bottom-line performance. The slowdown in China due to coronavirus-induced disruptions and moderating demand across industrial end markets have also weighed on the company’s shares.
Given significant international operations, foreign currency headwinds have also been a drag on MMM’s price performance. The strengthening of the U.S. dollar hurt the company’s sales by 5% in the fourth quarter. For 2023, the company expects foreign currency translation to hurt adjusted sales by 1-2%. Also, divestitures are expected to impact adjusted sales by 1%.
Amid multiple headwinds, 3M has provided a bearish outlook for 2023. For 2023, the company expects adjusted sales to decrease 2-6% year over year due to a decline in disposable respirator demand and adverse foreign currency movements. The company anticipates organic sales to either decline to 3% or remain flat year over year due to an estimated two percentage point negative impact from the disposable respirator decline and the cessation of its operations in Russia.
3M anticipates adjusted earnings of $8.50-$9.00 for 2023 ($9.88 was reported in 2022). The guidance includes a negative impact of 55-80 cents from the decline in disposable respirator demand, the exit of Russia operations, foreign currency translation and divestitures.
Zacks Rank & Key Picks
3M presently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering are as follows:
Deere has an estimated earnings growth rate of 28.1% for the current fiscal year. The stock has gained 15.7% in the past six months.
Ingersoll Rand (IR - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of approximately 3% for the current year. The stock has rallied 21.6% in the past six months.
Parker-Hannifin Corporation (PH - Free Report) presently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 9.1%, on average.
Parker-Hannifin has an estimated earnings growth rate of 3.7% for the current fiscal year. The stock has gained 32.8% in the past six months.
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3M (MMM) Gets Mired in Headwinds, Stock Down 27% in 6 Months
3M Company (MMM - Free Report) is plagued by persistent weakness in the Safety and Industrial segment, inflationary pressure, supply-chain disruptions and forex woes. Due to these headwinds, shares of the company have declined 26.9% in the past six months compared with the industry’s decrease of 10.9%.
Image Source: Zacks Investment Research
Let’s delve deeper to unearth the factors that are weighing on the stock’s performance.
3M’s Safety and Industrial segment is experiencing weakness due to softness in disposable respirator demand. In the fourth quarter, lower disposable respirator demand hurt organic sales by $165 million. For 2023, the company expects an impact of $450-$550 million from this headwind. Organic sales are expected to decline in the low-single digits for the segment in 2023.
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 reduced consumer spending due to continued inflationary pressure. Reduced consumer spending is also hurting the Healthcare and Consumer segments’ performances. Weakness in the medical solutions business is weighing on the Healthcare segment’s performance.
For 2023, the company expects healthcare segment organic sales to increase in the low to mid-single digits from the year-ago period. Organic sales in the Consumer segment are predicted to decline in the low-single digits in 2023.
Raw material and logistics cost inflation as well as supply-chain disruptions, including labor shortages, are affecting 3M’s bottom-line performance. The slowdown in China due to coronavirus-induced disruptions and moderating demand across industrial end markets have also weighed on the company’s shares.
Given significant international operations, foreign currency headwinds have also been a drag on MMM’s price performance. The strengthening of the U.S. dollar hurt the company’s sales by 5% in the fourth quarter. For 2023, the company expects foreign currency translation to hurt adjusted sales by 1-2%. Also, divestitures are expected to impact adjusted sales by 1%.
Amid multiple headwinds, 3M has provided a bearish outlook for 2023. For 2023, the company expects adjusted sales to decrease 2-6% year over year due to a decline in disposable respirator demand and adverse foreign currency movements. The company anticipates organic sales to either decline to 3% or remain flat year over year due to an estimated two percentage point negative impact from the disposable respirator decline and the cessation of its operations in Russia.
3M anticipates adjusted earnings of $8.50-$9.00 for 2023 ($9.88 was reported in 2022). The guidance includes a negative impact of 55-80 cents from the decline in disposable respirator demand, the exit of Russia operations, foreign currency translation and divestitures.
Zacks Rank & Key Picks
3M presently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering are as follows:
Deere & Company (DE - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Deere has an estimated earnings growth rate of 28.1% for the current fiscal year. The stock has gained 15.7% in the past six months.
Ingersoll Rand (IR - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of approximately 3% for the current year. The stock has rallied 21.6% in the past six months.
Parker-Hannifin Corporation (PH - Free Report) presently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 9.1%, on average.
Parker-Hannifin has an estimated earnings growth rate of 3.7% for the current fiscal year. The stock has gained 32.8% in the past six months.