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3M Company’s (MMM - Free Report) second-quarter 2023 adjusted earnings (excluding $14.52 from non-recurring items) of $2.17 per share surpassed the Zacks Consensus Estimate of $1.65. The bottom line declined in double digits year over year. This includes a negative impact from pre-tax restructuring charges of $212 million.
3M’s net sales of $8,325 million outperformed the Zacks Consensus Estimate of $7,955 million. However, the top line declined 4.3% year over year due to an adverse foreign currency impact of 0.9% and a 1.2% negative impact from divestitures. Organic sales fell 2.2%.
Region-wise, sales in the Americas decreased 1.5% year over year, while that in the Asia Pacific declined 12.8%. Sales from business in Europe, the Middle East and Africa inched up 0.6%.
The company reports top-line results under four business segments — Safety & Industrial, Transportation & Electronics, Health Care and Consumer.
Revenues from Safety and Industrial totaled $2,765 million, decreasing 5.5% year over year. The decline can be attributed to a 0.9% negative impact from adverse movements in foreign currencies. Organic sales declined 4.6% for the segment. The Zacks Consensus Estimate for Safety and Industrial segment revenues was $2,865.25 million.
Revenues from Transportation & Electronics totaled $2,191 million, reflecting a year-over-year decrease of 3.4%. The decline is attributable to a 1.3% adverse impact from movements in foreign currencies. Divestitures had a negative impact of 1.3%, while acquisitions benefited segmental revenues by 0.5%. Organic sales declined 1.3%. The Zacks Consensus Estimate for Transportation & Electronics segment revenues was pegged at $1975.34 million.
Revenues from Health Care were $2,075 million, down 4.8% year over year. The results were hurt by 0.8% and 4.1% impact from adverse foreign currency translation and divestitures, respectively. Organic sales were nearly flat in the reported quarter. The Zacks Consensus Estimate for Health Care revenues was pegged at $2,101.65 million.
Revenues from Consumer fell 2.7% year over year to $1,293 million. Organic sales decreased 2.2%. Movements in foreign currencies had a negative impact of 0.5%. The Zacks Consensus Estimate for Consumer segment revenues was $1,359.47 million.
Margin Profile
In the quarter under review, 3M’s cost of sales decreased 9.5% year over year to $4,606 million. Selling, general and administrative expenses jumped more than 100% to $12,204 million. Research, development and related expenses were nearly flat at $473 million.
In the second quarter, 3M reported an operating loss of $8.95 billion against the operating income of $110 million in the year-ago period. The downside was due to pre-tax charges of $10.3 billion related to its settlement with PWS on PFAS.
MMM’s adjusted operating income in the quarter dropped 14.5% year over year to $1,545 million. The adjusted operating margin was 19.3% compared with 21.6% in the year-ago quarter. The adjusted tax rate in the quarter was 19.1% compared with 19.8% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, 3M had cash and cash equivalents of $4,258 million compared with $3,655 million at the end of December 2022. Long-term debt was $12,954 million at the end of the second quarter compared with $14,001 million at the end of December 2022.
At the end of the second quarter, 3M generated net cash of $2,784 million from its operating activities, reflecting an increase of 30.2% from the year-ago quarter. Capital used for purchasing property, plant and equipment increased 5.4% to $852 million in the second quarter.
Adjusted free cash flow at the end of the second quarter was $2409 million, up 35.3% year over year. Adjusted free cash flow conversion was 105% at the end of the same period.
In the first half of 2023, 3M rewarded its shareholders with $1,655 million in dividend payments. The company did not repurchase shares in the second quarter.
2023 EPS Guidance Raised
Benefiting from strong operational execution and cost discipline, 3M has raised its adjusted earnings guidance for 2023. The company expects adjusted earnings of $8.60-$9.10 per share for the current year compared with $8.50-$9.00 anticipated earlier. The mid-point of the guided range — $8.85 — lies above the Zacks Consensus Estimate of $8.73.
Adjusted total sales are expected to decline 1-5% from the year-ago period. This implies an adjusted sales growth of (3)-0% from the year-ago period.
For 2023, MMM anticipates an adjusted operating cash flow of $5.9-$6.3 billion with conversion of 90% to 100%.
Zacks Rank & Key Picks
3M presently carries a Zacks Rank #3 (Hold).
Some better-ranked industrial stocks are as follows:
Enersys has an estimated earnings growth rate of 9.9% for the current fiscal year. Shares of the company have surged 73.7% in a year.
Xylem Inc. (XYL - Free Report) currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 17.7%, on average.
Xylem has an estimated earnings growth rate of 20% for the current year. Shares of the company have jumped 35.2% in a year.
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3M's (MMM) Q2 Earnings & Revenues Beat Estimates, '23 EPS View Up
3M Company’s (MMM - Free Report) second-quarter 2023 adjusted earnings (excluding $14.52 from non-recurring items) of $2.17 per share surpassed the Zacks Consensus Estimate of $1.65. The bottom line declined in double digits year over year. This includes a negative impact from pre-tax restructuring charges of $212 million.
3M’s net sales of $8,325 million outperformed the Zacks Consensus Estimate of $7,955 million. However, the top line declined 4.3% year over year due to an adverse foreign currency impact of 0.9% and a 1.2% negative impact from divestitures. Organic sales fell 2.2%.
Region-wise, sales in the Americas decreased 1.5% year over year, while that in the Asia Pacific declined 12.8%. Sales from business in Europe, the Middle East and Africa inched up 0.6%.
3M Company Price, Consensus and EPS Surprise
3M Company price-consensus-eps-surprise-chart | 3M Company Quote
Segmental Results
The company reports top-line results under four business segments — Safety & Industrial, Transportation & Electronics, Health Care and Consumer.
Revenues from Safety and Industrial totaled $2,765 million, decreasing 5.5% year over year. The decline can be attributed to a 0.9% negative impact from adverse movements in foreign currencies. Organic sales declined 4.6% for the segment. The Zacks Consensus Estimate for Safety and Industrial segment revenues was $2,865.25 million.
Revenues from Transportation & Electronics totaled $2,191 million, reflecting a year-over-year decrease of 3.4%. The decline is attributable to a 1.3% adverse impact from movements in foreign currencies. Divestitures had a negative impact of 1.3%, while acquisitions benefited segmental revenues by 0.5%. Organic sales declined 1.3%. The Zacks Consensus Estimate for Transportation & Electronics segment revenues was pegged at $1975.34 million.
Revenues from Health Care were $2,075 million, down 4.8% year over year. The results were hurt by 0.8% and 4.1% impact from adverse foreign currency translation and divestitures, respectively. Organic sales were nearly flat in the reported quarter. The Zacks Consensus Estimate for Health Care revenues was pegged at $2,101.65 million.
Revenues from Consumer fell 2.7% year over year to $1,293 million. Organic sales decreased 2.2%. Movements in foreign currencies had a negative impact of 0.5%. The Zacks Consensus Estimate for Consumer segment revenues was $1,359.47 million.
Margin Profile
In the quarter under review, 3M’s cost of sales decreased 9.5% year over year to $4,606 million. Selling, general and administrative expenses jumped more than 100% to $12,204 million. Research, development and related expenses were nearly flat at $473 million.
In the second quarter, 3M reported an operating loss of $8.95 billion against the operating income of $110 million in the year-ago period. The downside was due to pre-tax charges of $10.3 billion related to its settlement with PWS on PFAS.
MMM’s adjusted operating income in the quarter dropped 14.5% year over year to $1,545 million. The adjusted operating margin was 19.3% compared with 21.6% in the year-ago quarter. The adjusted tax rate in the quarter was 19.1% compared with 19.8% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, 3M had cash and cash equivalents of $4,258 million compared with $3,655 million at the end of December 2022. Long-term debt was $12,954 million at the end of the second quarter compared with $14,001 million at the end of December 2022.
At the end of the second quarter, 3M generated net cash of $2,784 million from its operating activities, reflecting an increase of 30.2% from the year-ago quarter. Capital used for purchasing property, plant and equipment increased 5.4% to $852 million in the second quarter.
Adjusted free cash flow at the end of the second quarter was $2409 million, up 35.3% year over year. Adjusted free cash flow conversion was 105% at the end of the same period.
In the first half of 2023, 3M rewarded its shareholders with $1,655 million in dividend payments. The company did not repurchase shares in the second quarter.
2023 EPS Guidance Raised
Benefiting from strong operational execution and cost discipline, 3M has raised its adjusted earnings guidance for 2023. The company expects adjusted earnings of $8.60-$9.10 per share for the current year compared with $8.50-$9.00 anticipated earlier. The mid-point of the guided range — $8.85 — lies above the Zacks Consensus Estimate of $8.73.
Adjusted total sales are expected to decline 1-5% from the year-ago period. This implies an adjusted sales growth of (3)-0% from the year-ago period.
For 2023, MMM anticipates an adjusted operating cash flow of $5.9-$6.3 billion with conversion of 90% to 100%.
Zacks Rank & Key Picks
3M presently carries a Zacks Rank #3 (Hold).
Some better-ranked industrial stocks are as follows:
Enersys (ENS - Free Report) presently flaunts a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys has an estimated earnings growth rate of 9.9% for the current fiscal year. Shares of the company have surged 73.7% in a year.
Xylem Inc. (XYL - Free Report) currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 17.7%, on average.
Xylem has an estimated earnings growth rate of 20% for the current year. Shares of the company have jumped 35.2% in a year.