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3M (MMM) to Report Q3 Earnings: What's in the Cards?

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3M Company (MMM - Free Report) is scheduled to release third-quarter 2018 results on Oct 23, before the market opens.

The company delivered better-than-expected results in two of the last four quarters, while reported in-line results in two. Average earnings surprise was a positive 2.22%. Notably, the company’s earnings of $2.59 were same as the Zacks Consensus Estimate in the second quarter of 2018.

Year to date, 3M’s shares declined 14.9%, worse than 8.7% fall recorded by the industry it belongs to.

Let us see how things are shaping up for 3M this quarter.

Factors to Affect Q3 Results

In the quarters ahead, 3M will gain from its solid product offerings, healthy demand in end-markets served and portfolio transformation initiatives. Its focus on innovation — evident from high research and development expenses — should be a positive too.

However, rising costs and expenses might be detrimental to 3M’s financial performance. It’s worth mentioning here that an increase in retirement benefit costs, raw material cost inflation and interest expenses were primarily responsible for the increase in cost of sales in the first two quarters of 2018. 3M believes that inflation in raw material costs might remain a concern in the quarters ahead.

Furthermore, stiff competition from local players in the countries where 3M operates, especially India, Brazil and Indonesia, puts immense pressure on it. Also, unfavorable movements in foreign currencies will be harmful.

3M does not provide quarterly projections. However, a look at its annual forecast will fairly provide a picture for the to-be reported quarter. For 2018, organic sales are predicted to grow 3-4% year over year. Benefits from acquired assets, net of divestiture-impact, will have a 1% positive impact on sales growth. Foreign currency translation will contribute just 1% to sales growth against 2% predicted earlier.

For the third quarter of 2018, the Zacks Consensus Estimate for revenues of 3M’s Industrial, Safety and Graphics, Electronics and Energy, Health Care and Consumer segments are pegged at $3,134 million, $1,769 million, $1,440 million, $1,516 million and $1,302 million respectively. These estimates reflect year-over-year growth of 13.4% for Industrial, 15.7% for Safety and Graphics, 1.8% for Electronics and Energy, 2.7% for Health Care and 5.3% for Consumer.

In addition, 3M predicts adjusted earnings within $10.20-$10.45 per share, lower than its previous projection of $10.20-$10.55. This revision takes into account the business lost due to the divestiture of the communication markets’ business.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with 3M has been provided below.

Earnings ESP: 3M has an Earnings ESP of -0.12%. The Zacks Consensus Estimate for the quarter is $2.70.

3M Company Price, Consensus and EPS Surprise

3M Company Price, Consensus and EPS Surprise | 3M Company Quote

Zacks Rank: 3M currently carries a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here is one company, ITT Inc. (ITT - Free Report) , in the industry that you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter. ITT currently carries a Zacks Rank #3 and has an Earnings ESP of +0.65%.

Two other companies, in the Zacks Industrial Products sector, that are likely to post upbeat earnings results this quarter are Tetra Tech, Inc. (TTEK - Free Report) and Flowserve Corporation (FLS - Free Report) .

Tetra Tech sports a Zacks Rank #1 and has an Earnings ESP of +0.96%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowserve carries a Zacks Rank #2 and has an Earnings ESP of +1.72%.

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