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3M's Margins Improve Amid Cost Pressures: Can the Trend Continue?
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Key Takeaways
3M lifted its adjusted operating margin by 40 basis points to 24.9% in the second quarter of 2026.
3M expects 2026 adjusted operating margins to expand 70-80 basis points year over year.
Higher tariffs, oil prices and PFAS exit costs pushed cost of sales up 4.7% year over year.
3M Company (MMM - Free Report) is implementing structural initiatives to enhance operating efficiency and support margin improvement. The company is reducing its corporate center, optimizing its geographic footprint, simplifying its supply chain, aligning go-to-market strategies with customer needs and adjusting manufacturing roles to production volumes. These measures are expected to reduce operating costs, support margin improvement and strengthen cash flow over the long term.
The company had completed most of its restructuring initiatives by the end of 2025. MMM 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, the company expects adjusted operating margins to expand 70-80 basis points year over year.
However, rising costs may hinder MMM’s ability to sustain this margin momentum. In the second quarter of 2026, its 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. In the quarters ahead, ongoing productivity gains and disciplined cost management are expected to support the company’s profitability.
Segmental Snapshot of MMM’s Peers
Among 3M’s major peers, 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%.
Another peer of MMM, 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.
The Zacks Rundown for MMM
Shares of 3M have gained 5.9% in the past year against the industry’s decline of 24.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 16.60X, above the industry average of 14.30X. MMM carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MMM’s earnings for 2026 has increased 0.1% in the past 60 days.
View the Zacks #1 Rank List
Image: Bigstock
3M's Margins Improve Amid Cost Pressures: Can the Trend Continue?
Key Takeaways
3M Company (MMM - Free Report) is implementing structural initiatives to enhance operating efficiency and support margin improvement. The company is reducing its corporate center, optimizing its geographic footprint, simplifying its supply chain, aligning go-to-market strategies with customer needs and adjusting manufacturing roles to production volumes. These measures are expected to reduce operating costs, support margin improvement and strengthen cash flow over the long term.
The company had completed most of its restructuring initiatives by the end of 2025. MMM 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, the company expects adjusted operating margins to expand 70-80 basis points year over year.
However, rising costs may hinder MMM’s ability to sustain this margin momentum. In the second quarter of 2026, its 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. In the quarters ahead, ongoing productivity gains and disciplined cost management are expected to support the company’s profitability.
Segmental Snapshot of MMM’s Peers
Among 3M’s major peers, 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%.
Another peer of MMM, 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.
The Zacks Rundown for MMM
Shares of 3M have gained 5.9% in the past year against the industry’s decline of 24.4%.
Image Source: Zacks Investment Research
From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 16.60X, above the industry average of 14.30X. MMM carries a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for MMM’s earnings for 2026 has increased 0.1% 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.