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Will 3M Be Able to Sustain Margin Momentum Amid Cost Pressures?
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Key Takeaways
3M's restructuring and productivity gains lifted adjusted operating margin to 24.9% in Q2 2026.
Supply-chain redesign and AI tools are driving its longer-term transformation and efficiency efforts.
Higher tariffs, oil prices and PFAS exit costs pushed cost of sales higher, pressuring margin momentum.
3M Company (MMM - Free Report) is taking structural measures to improve operating efficiency and strengthen margins. The company has been reducing the size of its corporate center, streamlining its geographic footprint, simplifying its supply chain, aligning go-to-market models with customers and optimizing manufacturing roles based on production volumes. These initiatives are expected to lower operating costs while supporting margins and cash flow over the long term.
MMM completed most of the restructuring actions by the end of 2025. The company is now shifting its focus toward longer-term transformation, including redesigning its supply-chain network and deploying AI-driven tools across its operations. In the second quarter of 2026, these efforts, combined with strong organic volume and productivity gains, helped lift 3M’s adjusted operating margin by 40 basis points year over year to 24.9%. For 2026, 3M expects adjusted operating margins to expand 70-80 basis points year over year.
However, rising costs could challenge the company’s ability to sustain this margin momentum. In the second quarter of 2026, cost of sales increased 4.7% year over year, while cost of sales as a percentage of total revenues rose 120 basis points to 58.7%. Higher tariff-related costs, rising oil prices and cost dis-synergies associated with the PFAS manufacturing exit contributed to the increase.
Overall, 3M’s restructuring and productivity initiatives are supporting margins, although persistent cost pressures remain a concern. Going forward, continued productivity improvements and cost-control measures are expected to help the company maintain healthy profitability.
Segmental Snapshot of MMM’s Peers
Among 3M’s major peers, Carlisle Companies Incorporated (CSL - Free Report) has been dealing with elevated raw-material and freight costs, particularly for petroleum-based inputs affected by the Middle East conflict and related supply disruptions. Not only is this pushing up Carlisle’s direct expenses, but it is also weighing on margins as pricing realization lags cost inflation. In the second quarter of 2026, Carlisle’s cost of sales increased 10.3% year over year to $1.0 billion and represented 63.8% of revenues compared with 62.7% a year ago.
MMM’s another peer, Honeywell Technologies (HON - Free Report) , has been dealing with the adverse impacts of the high cost of sales and operating expenses. On a consolidated basis, HON’s total cost of sales, comprising the cost of products and services sold, was up 7.2% year over year in the second quarter. Honeywell Technologies’ research and development expenses surged 14.2% year over year in the same period. Its operating margin fell 190 basis points to 17.9%.
The Zacks Rundown for MMM
Shares of 3M have gained 14.3% in the past year against the industry’s decline of 25.1%.
Image Source: Zacks Investment Research
From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 18.95X, above the industry average of 15.63X. MMM carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MMM’s earnings for 2026 has increased 2.9% in the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
Will 3M Be Able to Sustain Margin Momentum Amid Cost Pressures?
Key Takeaways
3M Company (MMM - Free Report) is taking structural measures to improve operating efficiency and strengthen margins. The company has been reducing the size of its corporate center, streamlining its geographic footprint, simplifying its supply chain, aligning go-to-market models with customers and optimizing manufacturing roles based on production volumes. These initiatives are expected to lower operating costs while supporting margins and cash flow over the long term.
MMM completed most of the restructuring actions by the end of 2025. The company is now shifting its focus toward longer-term transformation, including redesigning its supply-chain network and deploying AI-driven tools across its operations. In the second quarter of 2026, these efforts, combined with strong organic volume and productivity gains, helped lift 3M’s adjusted operating margin by 40 basis points year over year to 24.9%. For 2026, 3M expects adjusted operating margins to expand 70-80 basis points year over year.
However, rising costs could challenge the company’s ability to sustain this margin momentum. In the second quarter of 2026, cost of sales increased 4.7% year over year, while cost of sales as a percentage of total revenues rose 120 basis points to 58.7%. Higher tariff-related costs, rising oil prices and cost dis-synergies associated with the PFAS manufacturing exit contributed to the increase.
Overall, 3M’s restructuring and productivity initiatives are supporting margins, although persistent cost pressures remain a concern. Going forward, continued productivity improvements and cost-control measures are expected to help the company maintain healthy profitability.
Segmental Snapshot of MMM’s Peers
Among 3M’s major peers, Carlisle Companies Incorporated (CSL - Free Report) has been dealing with elevated raw-material and freight costs, particularly for petroleum-based inputs affected by the Middle East conflict and related supply disruptions. Not only is this pushing up Carlisle’s direct expenses, but it is also weighing on margins as pricing realization lags cost inflation. In the second quarter of 2026, Carlisle’s cost of sales increased 10.3% year over year to $1.0 billion and represented 63.8% of revenues compared with 62.7% a year ago.
MMM’s another peer, Honeywell Technologies (HON - Free Report) , has been dealing with the adverse impacts of the high cost of sales and operating expenses. On a consolidated basis, HON’s total cost of sales, comprising the cost of products and services sold, was up 7.2% year over year in the second quarter. Honeywell Technologies’ research and development expenses surged 14.2% year over year in the same period. Its operating margin fell 190 basis points to 17.9%.
The Zacks Rundown for MMM
Shares of 3M have gained 14.3% in the past year against the industry’s decline of 25.1%.
Image Source: Zacks Investment Research
From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 18.95X, above the industry average of 15.63X. MMM carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MMM’s earnings for 2026 has increased 2.9% in the past 60 days.
Image Source: Zacks Investment Research
MMM stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.