3M Company (MMM) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the 3M Second Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. . As a reminder, this conference is being recorded, Tuesday, July 27, 2021. I would now like to turn the call over to Bruce Jermeland, Senior Vice President of Investor Relations at 3M. Bruce Jermeland: Mike Roman : Thank you, Bruce, and good morning, everyone. 3M's performance in the second quarter was strong as we posted organic growth across all business groups and geographic areas. Our team executed well and delivered increased earnings, expanded margins and robust cash flow. From a macro perspective, the global economy continues to improve, though uncertainty remains due to COVID-19 and heightened concern over the increase in Delta variant cases. We saw ongoing strength in many end markets, including home improvement, oral care and general industrial, along with a pickup in health care elective procedures. We continue to work to mitigate ongoing inflationary pressures and supply chain challenges as well as end market dynamics such as the semiconductor shortage impacting automotive build rates and electronics. We are also beginning to see a decline in pandemic-related demand for disposable respirators, which I will discuss on the next slide. Looking forward, we will stay focused on investing in emerging growth opportunities, improving productivity and advancing sustainability. We are confident in our ability to continue executing well in the face of COVID-19 uncertainties and are raising our full year guidance for organic growth to 6% to 9%, and earnings per share to $9.70 to $10.10. Monish Patolawala: Thank you, Mike, and I wish you all a very good morning. Please turn to Slide 6. Company-wide, second quarter sales were $8.9 billion, up 25% year-on-year or an increase of 21% on an organic basis. Sales growth, combined with operating rigor and disciplined cost management, drove adjusted operating income of $2 billion, up 40%, with adjusted operating margins of 22%, up 240 basis points year-on-year. Second quarter GAAP and adjusted earnings per share were $2.59, up 44% compared to last year's adjusted results. On this slide, you can see the components that impacted both operating margins and earnings per share as compared to Q2 last year. A strong year-on-year organic volume growth, along with ongoing productivity, restructuring efforts and other items, added 4.1 percentage points to operating margins and $0.89 to earnings per share year-on-year. Included in this margin and earnings benefit were a few items of note. First, during the quarter, the Brazilian Supreme Court issued a ruling that clarified the calculation of Brazil's federal sales-based social tax, essentially lowering the social tax that 3M should have paid in prior years. This favorable ruling added $91 million to operating income or 1 percentage points to operating margins and $0.12 to earnings per share. Next, as you will see later today in our 10-Q, we increased our other environmental liability by nearly $60 million and our respiratory liabilities by approximately $20 million as part of our regular review. In addition, we also incurred a year-on-year increase in ongoing legal defense costs. We are currently scheduled to begin a PFAS-related trial in Michigan in October, along with the next step in the Combat Arms Earplug multidistrict litigation, with one trial in September and one in October. Operator: . Our first question comes from the line of Scott Davis with Melius Research. Scott Davis: Good morning, Mike and Monish. I'm on Slide 13 in the appendix, just looking at the price data. And based on my notes, price was up about, I think, 70 basis points last quarter. It looks like 10 basis points this quarter, but the real headwind was Asia Pacific. What -- can you give us a little color into kind of -- I know some of this might be mix. So what's impacting the price dynamic, perhaps there's some comp issues to there. So I'll just leave it at that. Monish Patolawala: Yes. Sure, Scott. It's a great question. And you're right. But as I first said, we are raising prices everywhere. It's taking a little bit of time, but it's broad-based. You've seen what we have said we'll do in the third quarter and the fourth quarter. To answer your question specifically on the second quarter, you hit on one point, which is a comp issue from year-over-year but the second piece of this was also as the volumes came in pretty strong in the second quarter, we had some rebates that get accounted for with that extra volume, and that drove it. But when you reflect on the guide that we gave you, price pretty much came in where we had thought. It's just slightly lower than that. So we were expecting this. Scott Davis: Okay. And then was there a supply chain impact on sales, an explicit supply chain impact on sales that held back sales? Or was it more just a cost logistics issue? Monish Patolawala: I would say, Scott, it's really hard to figure out exactly what the impact was. There definitely was an impact, I would say, in general, in the larger market and 3M was no different where supply constraints were there. The team has done a marvelous job of trying to keep the factories running the best they can and making sure we are taking care of our customers as quickly as we can. So I would say there were more inefficiencies that we have had to deal with just as raw material was not as fluid as we would have thought through this process. But overall, we have done our best to keep our customers whole through this process. But this is an ongoing piece, Scott, that we'll have to watch how the second half plays itself out. You're seeing not only us but end markets also getting impacted by some of the raw material shortages, and we're just going to keep working this as we go through the second half. Operator: Our next question comes from the line of Joe Ritchie with Goldman Sachs. Joseph Ritchie: Can you guys talk a little bit about the durability in the Health Care margins? Impressive back to 25% this quarter, I'm just wondering if this is now kind of like a baseline going forward. We're back to kind of like the 2019-ish type levels. Monish Patolawala: Yes. I think, Joe, that's a great question. I think we also keep looking at that all the time. I would just start with the team has done a really nice job of continuing to drive margins up while still investing in the business. The sharp increase on a year-over-year basis is driven by a lot of the volume increase that you saw Q2 of last year versus Q2 of this year. Third, I would say the volume leverage has helped, but we still got hurt by raw materials and logistics costs, and we continue to invest in the business. I would -- to answer your specific question on what does it look like going forward, I think it all comes down to ultimately where does volume turn out to be? As I said in my prepared remarks that disposable respirators are starting to slow down. You're seeing a Q3 impact of $50 million to $100 million on a year-over-year basis and $100 million to $300 million for the second half. Some -- many -- most of that should hit the Health Care segment. So we'll see where volume plays itself out. But secondly, I think is how much investments we keep driving as we see hospitalizations increase and elective procedures go up. So I think it's going to be a trade between that. Overall, I would say the team and I, we all believe in continuous improvement. So we're going to keep driving productivity continuing to reduce cost, investing where we think it's the right place to invest and driving efficiency in SG&A as much as we can. Joseph Ritchie: Maybe just following up on that, it is helpful to have that context. As I think about just the Health Care business, right, you did mention that elective procedures have increased and perhaps maybe that's going to offset some of the respirator issue. Should we think of that as being mix-accretive? If, in fact, elective procedures are increasing and are potentially offsetting the weakness in respirators? Monish Patolawala: I would tell you, I think the way we got to think about it is, as electives go up, we don't have a one-for-one perfect connection between electives. So it depends on which piece of the demand goes up, Joe. So it's really hard to give you the perfect answer on whether it's mix or not. What I generally believe is as elective procedures go up and as volume picks up, you will see us getting more leverage because of that. How much the disposable respirator volume goes down and where it comes from will also have an impact. So it's a hard one for me to quantify exactly. Operator: Our next question comes from the line of Deane Dray with RBC Capital Markets. Deane Dray: Just want to say that Slide 9 is especially helpful with all the moving parts, your assumptions for the year and assumptions for the third quarter. So I appreciate all those specifics. And my first question is on capital allocation. You got the balance sheet in good shape, 1.3x net leverage. You did restart buybacks, but still share count looked -- looks like it increased. Why would you not be doing more buybacks here? And can we start there, please? Monish Patolawala: Yes. Sure, Deane. As I told you, from our priority of capital allocation, our first priority is always investing organically between R&D and CapEx because we think that's the biggest return for our money. The second is dividend. You've seen we have increased dividend. It's 63rd year in a row that dividend is up. It matters to our shareholders. That's our second priority. Our third priority is M&A, and we will normally do M&A in the area where we believe that the target that we're going to acquire can benefit from being a part of 3M. Right now, we are busy integrating Acelity, and the team is doing a nice job integrating that. So we don't see any acquisitions of the size of Acelity in the near future, but we have an active pipeline of a number of things. And then our last discretionary use of capital allocation is share buyback. So for the year, year-to-date, we have done $700 million, give or take. And I would say share buyback and continued share back depends on what the volume is going to be, depends on the needs of future capital in uses that we have as well as what the cash flow that we generate will depend on that. So I would say, we'll keep you posted during these quarterly calls as we continue this program and decide how much we do. Deane Dray: Terrific. And then just as a follow-up, given all the changes, it seems like day-to-day in the macro, any commentary about how July has started, especially regionally would be helpful here? Mike Roman : Yes, Dean, I would say, I start with the expectation that the team is going to continue to execute well as we go into the second half of the year. And we've talked about some of the dynamics. Monish outlined a number that we're seeing. I would say, so far, no surprises as we start the first few weeks of July. We are expecting the global macroeconomic and end market strength to continue. It will remain fluid. We talked about the uncertainties as we look into the second half. We expect and are seeing continued increase in elective procedures in health care, home improvement, expected to remain strong. Industrial, more broadly, generally improving as we go in the second half. We talked about it in the first half, we saw broad-based growth across geographies, and we expect this to continue it. The uncertainty there is COVID and the impact on any increases in cases and hospitalizations. There are certainly some areas around the world where we're seeing that. And even as we talk about the decline in respirator -- disposable respirator demand globally, we're seeing areas that we are increasing supply. And so that's going to be one of the things that can impact second half geographically across the world. So we -- while we expect overall pandemic-related respirator demand to decline, we expect some areas we'll see stronger demand as COVID plays out. So that gives you a little bit of a view of how we look around the world second half. Operator: Our next question comes from the line of John Walsh with Credit Suisse. John Walsh: Maybe just for the first one, a clarification. I wanted to know if you could give us an order of magnitude of what you're looking at in terms of price increases that you plan to put through across the product portfolio and obviously, understand it will probably vary by product line. And then second question is, if I look at your kind of organic growth, kind of the same growth-on-growth in Q2 as Q1. Was curious if you have any commentary around customer channel inventory? And if you're seeing any change in behavior there? Mike Roman : Yes, John, I would say price -- our teams are focused, as Monish talked about, on taking price in the second half to help us offset what we're seeing in inflation. And that's fairly broad-based. We -- it takes -- as we talked about, it takes some time to implement price changes and get ahead of inflation and it's been -- inflation has been an ongoing challenge as we've gone through the year. So we're expecting to see stronger price broad-based as we get into the second half and into fourth quarter, we start to see a price raw positive impact. And if you look at where our channel inventories today, this is something we're always asking ourselves. It's a dynamic that we are continuously measuring and assessing every region in the world. And I would say, given the dynamics in the marketplace, the snapback in the economy, the fluid and uneven market dynamics, it's difficult to know what the right level is today. We get visibility on where our sell-in and sell-out is. With that snapback in demand, it's hard to get clear visibility on levels -- appropriate levels of inventory. There are some areas, of course, that are very visible, the ongoing semiconductor chip shortages, and they're impacting production volumes, and we are -- we see our inventory in the channel aligning with that. We've talked quite a bit about the visibility we're putting on N95 respirators specifically. But beyond that, it's really going to depend on how demand plays out in each market to really get a view as we go through third quarter of where inventory in the channel sets. Operator: . Our next question comes from the line of Julian Mitchell with Barclays. Julian Mitchell: I just wanted to try and circle back to the Safety and Industrial outlook. I suppose it's possible if we look at Q4 that your sales in that segment could be down year-on-year in aggregate because of respirators. Just wondered any perspectives on that? And also, the margin implication in 2020, your S&I margins were up a good amount. Q2, they're softer, I think, sequentially and year-on-year as the respirator business rolls over. So should we expect that sort of mix headwind to play out for a few more quarters? Monish Patolawala: Yes. I think, Julian, it's a great question on Safety and Industrial. So to answer your specific question first on the impact, could it be negative on a year-over-year basis? As we said, and just a reminder, in 2019, we used to have revenue approximately $600 million of disposable respirators that went up to $1.4 billion in 2020. And as I look at the second half, we told you there could be a risk of $100 million to $300 million, which is the range of where we think disposable respirator volume would come down on a year-over-year basis. And if we go to that higher end of the range, which is $300 million, yes, the answer is you could definitely see negative volumes. What we have been doing as a part of this as health care demand has waned due to lower hospitalizations due to COVID and increase in electives is we have been moving production out from the hospital channel to different parts, which is industrial and governments, which we are actively doing. The other piece of Safety and Industrial is, as I mentioned in Q2, we have seen growth in quite a few other segments of Safety and Industrial, whether it's in our respiratory portfolio with our safety portfolio, with head and face masks, whether you've seen us increase in our abrasive business, in our adhesives business, our roofing granules. So all the other segments, automotive aftermarket, have seen increase. And depending on how the economy plays itself out, and as long as industrial activity continues, you should see continued growth in those areas. And our current assumption is that long term, those markets will come back. I think it's going to be a little fluid in the second half, depending on how COVID plays itself out. To answer your second question on margin, you're right, as we have seen in 2019 versus '20, we did get benefited a lot by the volume leverage that we got across Safety and Industrial. So ultimately, where volume lands in the second half will have an impact on where margins ultimately go. We are actively working on price increases, broad-based in that segment. It's -- how much of that is offset by price and raws and logistics cost is the second offset. And the third one is the ongoing legal fees or reserves that we have taken, will be the third one. And then the last one I would say is what do we invest in growth, productivity and sustainability and especially growth, because as industrial activity goes up in '22 and '23, we're going to continue to invest in that segment. So put all that together, that's how we see where margins are going to land. Operator: Our next question comes from the line of Stephen Tusa with JPMorgan. Stephen Tusa: Can you just maybe talk about, other than the mask headwind kind of sequentially, do you expect the kind of auto stuff -- like what else is getting worse sequentially, kind of when we think about 3 to 4 -- 3Q and 4Q trends? Monish Patolawala: So Steve, I would say, I would just put everything in the context of back to end markets, in total, we feel will remain strong. I think you're going to see volatility as we get through the second half with what happens with COVID. So a couple of items to note. We believe that elective procedures will continue to go up quarter-over-quarter. But in some parts of the world, you could see it go down. Secondly, I would say auto does show an increase. It's still on a year-over-year headwind, down 3% in the third quarter. And if my memory is right, it's projected to be down 3.7% in the fourth quarter. I think the semiconductor shortages will have an impact on what happens there, and we'll see where that plays itself out. Smartphone shipments are supposed to be down on a year-over-year basis. We'll see where it lands sequentially. And then tablets and TVs, which also were benefited tremendously last year, are also projected to be down on a year-over-year basis, but hard to quantify what exactly it looks like on a sequential basis. You have seen us -- you have seen a pretty good increase in stationery and office supply in the second quarter. That momentum is there right now, where we are seeing sell-in trends as retailers are planning to have people -- more people return to the workplace, kids in school, but depending on how the pandemic plays out, that could have an impact. And then on Safety and Industrial, as I mentioned in the prior question, I think there's an assumption that industrial activity continues. But currently, the supply chain shortages across the world also put a lot of variability onto what that demand looks like. And that's why when we put all that together, we said we are prudent to call the year at 6% to 9% for the year versus the 3% to 6% that we had said earlier. But overall, I -- go ahead. Stephen Tusa: I guess at the high end of the range, I think first half to second half, sales are down, which makes sense because of the mask dynamic. And normally, seasonally, I think they’re down in the 4Q from a modestly up 3Q versus 2Q. But I guess is there anything this year seasonally, i.e. kind of the semi shortages kind of pushing demand to be a little bit better seasonally sequentially? You're kind of saying there's a lot of moving parts and like. So it's kind of normal seasonality and then including kind of the masks? Monish Patolawala: That's right, Steve. There is a lot of variability. But we'll keep you posted in there. Yes. Operator: Our next question comes from the line of Nigel Coe with Wolfe Research. Nigel Coe: Yes. So on the raw mats, Monish, based on your FICO convention and food purchasing, et cetera, when do you expect commodity inflation to peak? I don't know whether that's on a year-over-year basis or whether that's on a sequential basis, but when do you expect to see the peak in those raw mats? Monish Patolawala: So if you're asking specifically on commodities, I think it's a really hard one to call. For example, I would tell you, when we first gave our guide of $0.30 to $0.50, which has now been guided to $0.65 to $0.80, I would tell you, what we have seen is a broad-based increase in all commodities, whether it is polypropylene, chemical, resins we are seeing in our outsourced manufacturing goods, not just the labor cost, but other commodities that go into that also getting passed. And then logistics cost has continued to be a pretty strong headwind. Where that will peak? I think, in my view -- and I may be wrong here -- at some point, demand and supply need to start settling itself out. There's a lot of demand, there's not enough supply based on all the V-shape recovery with the congestion in the ports, et cetera. And until that stabilizes itself out, I think we are going to continue to see inflation. We have seen where crude prices have gone up much heavier than we had thought coming into the year. Polypropylene has remained strong or heavy, inflationary. Ocean rates have gone up a lot in the last 3 to 6 months. So it's really hard for us to come back and say, when does it peak and when it start coming down. So we've taken what we know. We have put in all the factors that we know. We've had a prediction of where we think these things could go. And we have come up with $0.65 to $0.80, which currently is our best guide of where we think inflation is going to be. But with that said, as I've mentioned, we are taking broad-based price increases everywhere to help offset the mitigation of this. We are also increasing yield. We are working with our suppliers to reduce prices, et cetera. And then in -- so third quarter, we'll see a headwind of 50 to 100 basis points price versus raw. And in the fourth quarter, our anticipation is that we should be able to get it to be flat to positive, which means price will offset the raw material inflation. Nigel Coe: Okay. That's really helpful explanation. I think I'll stick with you here on the second half outlook. You're calling out legal costs, legal defense costs in the second half of the year. You didn't give a number around that. So I'm assuming it's not that material, but how do you think about just the magnitude of that in the back half? I'm just concerned if defense costs are not settlements necessarily. I'm thinking here about the earplug litigation and also Hoosick Falls settlement that you just announced? Monish Patolawala: Yes. So I think the first one that the Hoosick Falls settlement was a part of our reserve. So that was a part of the calculus already. I would say we will -- we are -- it's ongoing litigation. If you look at all the SEC material that we file as well as the Q that will get filed later on the day, should give you an update of all the cases. But just for your benefit, we got a PFAS case coming up in the October of this year. It's with Wolverine and the use of PFAS in there, and we've got 2 Combat Arm trials coming up. So as we prepare for those cases, that's the increased cost in legal fees. And what I would tell you is we will spend what is required to defend ourselves as we go through these cases and that's what the cost is being incurred for. Operator: Our next question comes from the line of Andrew Obin with Bank of America. Andrew Obin: Just a sort of longer-term question. I think, historically, 3M has very strong position in terms of sort of global capacity in your key technologies. How do you think about sort of global nonwoven capacity post COVID? And are you seeing emergence of new players? Does it change sort of strategic landscape for 3M vis-à-vis players, particularly players out of Asia longer term? Mike Roman : Yes. Thanks, Andrew. We -- as I highlighted in my prepared remarks, we saw probably the peak of demand, at least near term, in Q1. And we -- as you know, we built additional capacity as we went through 2020. By the end of the year, we were at a run rate of 2.5 billion N95 respirators on an annual basis. And so that's the capacity we come into the year. Other manufacturers build capacity as well to respond to the pandemic. And I think you see some of them idling some of their capacity as demand comes off the peak. And we'll begin that process as well to idle lines to be ready for the next emergency or changes in COVID-19. I mean, we can ramp up quickly. So our strategy is to be in a position to be a leader in personal safety, personal protective equipment in normal times, and that's really serving the broader industrial markets, serving consumer markets, serving health care markets, and that's our strategy for where we manufacture and the volumes. And then we have that idle capacity so we can surge in times of emergency. I think we're in a better position than ever before globally to be able to respond to a pandemic. And I would add, it's been good to see governments following through on their commitments to stockpile. That's something that we have a number of efforts underway around the world that we're supporting as we come through the first half of the year. So that, I think, prepares the world better for the next emergency, the next pandemic. So it's going to -- it will depend. When you look at where are we going to end up with respirator demand? We think we'll end up somewhere above where we were pre-pandemic. As use and protocols are changing around the world, we'll be well aligned to serve that. Our brand will be strong. We've got a leading brand position in PPE and can -- and really take advantage of that position around the world. And so I think we've got the model well aligned. I think there's a surge capacity that will be available. How much will depend both on the demand that comes in any kind of future emergency. And I think we're -- like I said, we're ready for our part of that. Andrew Obin: I guess my question was sort of broader and longer term. A lot of this technology is used air filters, automotive, and I was just wondering if you expect this incremental capacity that was brought on by your competitors to go into these industrial adjacencies and generate just more global competition. That was the question actually. Mike Roman : Yes, Andrew, I can speak about us. I mean we are -- our nonwoven capacity, we do leverage that and utilize that in other areas, other products that we have like air filtration. So it is an opportunity for us that even with the capacity that we've built to be -- respond to the pandemic, we can take advantage of that and use that in other areas. And that's something that we're able to do broadly. We take our technologies and find innovative uses for them and air filtration is one of those. Will others do that? I'm sure there will be a focus in other markets for some of that capacity around the world. How much? I don't know how to give you a view of that perspective. The world will continue to grow, and we see trends in personal safety, air filtration. So the demand is going to continue to grow. So to some degree, it will -- the demand -- the capacity will grow into the demand as we go forward over time. Operator: Our next question comes from the line of Nicole DeBlase from Deutsche Bank. Nicole DeBlase: So you always give kind of helpful color by geography, and there's been a lot of noise about things kind of falling down in China with respect to a lot of different pieces of macro data. Can you guys just talk a little bit about what you're seeing in China across your businesses? Mike Roman : Sure, Nicole. I -- like I highlighted for the broader business, we saw broad-based growth, double-digit growth in our Transportation and Electronics, our Safety and Industrial and our Health Care businesses. Consumer was up mid-single-digits as we came through the quarter. And our growth was led by general industrial, some of the segments that are growing there, including our abrasives portfolio. Auto, OEM had strong growth and electronics. It's an important market for us. It's 10% of our total revenue. It grew over 20% in the first half. Last year, second quarter, we saw 3% growth. So China recovered, if you remember, ahead of other regions around the world. And when you look at the second half, comparisons start to get a little more challenging. And so we're expecting just year-over-year comps, I would say, we expect to see a little more challenge there. We still see opportunities for growth across our businesses in some of the same areas that we've highlighted on a global basis. Automotive will continue to be a focus, penetrating with the OEMs there. And we see -- even though it's our smallest business, we see significant opportunities to serve Chinese consumers through our consumer business, especially in areas like air and water quality. So it's -- we see opportunities, maybe a more challenging year-over-year comp, but still opportunities for growth. Nicole DeBlase: Got it. Thanks, Mike. And if I could just follow-up on the second half margin outlook. There's clearly a lot of moving pieces here with legal costs, growth investments, price cost. Maybe just to boil it down, do you guys still expect to kind of be in that 30% to 40% incremental margin range in 3Q and 4Q? Monish Patolawala: So I would just say, Nicole, volume is the biggest driver that gives us leverage. So I think that's step #1 with all the volatility, the uncertainty that's out there. The question is where does second half volumes land as well as we've given you the range on disposable respirators are going to be down $100 million to $300 million on a year-over-year basis. The team continues to drive operating rigor so driving productivity and efficiency across the supply chain. We are going after price increases, and our anticipation is that in the fourth quarter, we should be able to offset the price -- the raw and logistics cost impact. So I would boil it down to saying what margin will come down to in the second half and what incrementals are, will depend on the volume, will depend on our ability to offset the price -- the raw and logistics pressure through price increase, continued productivity and good execution by the 3M team. And then finally, our decision on how much we're going to invest in growth, productivity and sustainability, plus a lot of these indirects that start snapping back, as hopefully, people start traveling. You've seen we've been very disciplined in the first half of making sure that we didn't spend ahead of what volumes come back. But as we see volumes coming back in, you're going to see those indirect start snapping back up. And then the last one is the legal fees and continuing to do what we think is right to protect ourselves as these cases go through. So that's all the factors that will ultimately impact what the incrementals are going to be. Operator: Our next question comes from the line of Andrew Kaplowitz with Citi. Eitan Buchbinder: This is Eitan Buchbinder on for Andy Kaplowitz. Priority growth platforms delivered 10% growth in Q1. Can you update on how the group performed in Q2 as well as your outlook for the faster-growing businesses in the back half of the year? Mike Roman : Yes, Eitan. The priority growth platforms also had strong growth. We talked about it in Q1, second quarter as well. So overall, they were up over 40% in second quarter. Now over $500 million in revenue as a group. And I highlighted a couple of other areas of our businesses that are seeing strong sequential growth and market dynamics that are attractive. So these priority growth platforms broadly are in attractive market spaces. Part of that priority investment in growth that we've been talking about even as we came through 2020, staying focused and aggressively investing in growth areas and PGPs, as we call them, the priority growth platforms, continue to be an important part and performing well. Eitan Buchbinder : That's helpful. The Electronics Business Group was up 13% year-over-year, but down sequentially about 4%. So could ongoing chip supply constraints lead the business to decline sequentially in Q3? Mike Roman : Well, we saw, as we said, some strength in the end markets. And I think it's -- the first half, we were up overall, still low teens for the business. And maybe it's -- I would say the -- it was really more of a seasonality than a sequential dynamic. And as we get to the second half, the one other thing I would add, we're going to start to see some more challenging comps. We saw strong growth dynamics, not only in our home improvement and other areas in consumer also in the cleaning supplies business as we went through the pandemic. So that's the other dynamic to watch. Operator: That concludes the question-and-answer portion of our conference call. I will now turn the call back over to Mike Roman for closing comments. Mike Roman : To wrap up, our second quarter performance was strong, marked by broad-based growth, increased margins and robust cash flow. I'm confident in our ability to continue executing well as we navigate COVID-19 impacts. And we will stay focused on taking advantage of market trends and overcoming supply challenges while continuing to invest in growth, productivity and sustainability. Thank you for joining us. Operator: Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.
3M Delivers Solid Q1 as Cost Cuts and Pricing Power Lift Margins
3M (NYSE:MMM) started 2025 on a strong note, delivering first-quarter results that topped Wall Street projections, thanks to steady sales growth and a notable jump in profitability. As a result, shares rose more than 8% intra-day today.
The company reported adjusted earnings of $1.88 per share, outpacing the average analyst forecast of $1.75. Quarterly revenue reached $5.8 billion, narrowly beating expectations and marking a modest 0.8% increase from the same period last year. Organic sales rose 1.5% year-over-year, signaling stable underlying demand across its product portfolio.
Operational efficiency played a major role in the upbeat quarter. Adjusted operating margins improved to 23.5%, a significant gain of 220 basis points from the prior year. The company credited strategic pricing efforts and ongoing cost-cutting measures for the margin expansion.
Looking ahead, 3M projects full-year adjusted earnings in the range of $7.60 to $7.90, bracketing the consensus estimate of $7.75. However, the company acknowledged that trade-related headwinds could shave off as much as $0.40 per share from that forecast, depending on how tariff risks unfold.
3M Delivers Solid Q1 as Cost Cuts and Pricing Power Lift Margins
3M (NYSE:MMM) started 2025 on a strong note, delivering first-quarter results that topped Wall Street projections, thanks to steady sales growth and a notable jump in profitability. As a result, shares rose more than 8% intra-day today.
The company reported adjusted earnings of $1.88 per share, outpacing the average analyst forecast of $1.75. Quarterly revenue reached $5.8 billion, narrowly beating expectations and marking a modest 0.8% increase from the same period last year. Organic sales rose 1.5% year-over-year, signaling stable underlying demand across its product portfolio.
Operational efficiency played a major role in the upbeat quarter. Adjusted operating margins improved to 23.5%, a significant gain of 220 basis points from the prior year. The company credited strategic pricing efforts and ongoing cost-cutting measures for the margin expansion.
Looking ahead, 3M projects full-year adjusted earnings in the range of $7.60 to $7.90, bracketing the consensus estimate of $7.75. However, the company acknowledged that trade-related headwinds could shave off as much as $0.40 per share from that forecast, depending on how tariff risks unfold.
3M Company (NYSE: MMM) Surpasses Earnings and Revenue Estimates in Q1 2025
- 3M Company (NYSE:MMM) reported EPS of $1.88, beating estimates and showing a 10% increase in adjusted EPS year-over-year.
- The company's revenue exceeded expectations at $5.8 billion, with organic growth contributing to a 1.5% increase year-over-year.
- Despite a slight decrease in GAAP sales, 3M's operating margin improved significantly, indicating efficient cost management and profitability.
3M Company (NYSE:MMM), a diversified technology and manufacturing company known for its innovative products across various sectors, including healthcare, consumer goods, and industrial solutions, reported its first-quarter 2025 financial results on April 22, 2025. The company announced an earnings per share (EPS) of $1.88, surpassing the estimated $1.77. Additionally, 3M reported actual revenue of $5.8 billion, exceeding the estimated $5.73 billion.
Despite a 1% decrease in GAAP sales to $6 billion year-over-year, the company's operating margin improved by 180 basis points to 20.9%, and its EPS surged by 61% to $2.04. On an adjusted basis, sales were $5.8 billion, reflecting an organic growth of 1.5% year-over-year. The adjusted operating margin increased by 220 basis points to 23.5%, and the adjusted EPS rose by 10% to $1.88.
The company has maintained its earnings forecast for 2025, projecting EPS to be between $7.60 and $7.90. However, tariffs are expected to negatively impact earnings, reducing them by 20 to 40 cents per share. Despite this challenge, 3M's Chairman and CEO, William Brown, expressed satisfaction with the company's performance, highlighting positive organic sales growth and better-than-expected margins.
3M's stock has experienced a decline recently, with a 1.43% decrease year-to-date and a significant 14.98% drop over the past month. The technical analysis suggests a bearish outlook as the stock trades at $127.23, below its short and medium-term moving averages. However, it remains above its 200-day moving average of $114.00, indicating potential long-term bullish trends.
3M's financial metrics include a price-to-earnings (P/E) ratio of approximately 16.43 and a price-to-sales ratio of about 2.56. The company's debt-to-equity ratio is notably high at 3.39, suggesting a significant reliance on debt financing. Despite this, 3M maintains a current ratio of approximately 1.41, indicating its ability to cover short-term liabilities with short-term assets.
3M Company (NYSE: MMM) Surpasses Earnings and Revenue Estimates in Q1 2025
- 3M Company (NYSE:MMM) reported EPS of $1.88, beating estimates and showing a 10% increase in adjusted EPS year-over-year.
- The company's revenue exceeded expectations at $5.8 billion, with organic growth contributing to a 1.5% increase year-over-year.
- Despite a slight decrease in GAAP sales, 3M's operating margin improved significantly, indicating efficient cost management and profitability.
3M Company (NYSE:MMM), a diversified technology and manufacturing company known for its innovative products across various sectors, including healthcare, consumer goods, and industrial solutions, reported its first-quarter 2025 financial results on April 22, 2025. The company announced an earnings per share (EPS) of $1.88, surpassing the estimated $1.77. Additionally, 3M reported actual revenue of $5.8 billion, exceeding the estimated $5.73 billion.
Despite a 1% decrease in GAAP sales to $6 billion year-over-year, the company's operating margin improved by 180 basis points to 20.9%, and its EPS surged by 61% to $2.04. On an adjusted basis, sales were $5.8 billion, reflecting an organic growth of 1.5% year-over-year. The adjusted operating margin increased by 220 basis points to 23.5%, and the adjusted EPS rose by 10% to $1.88.
The company has maintained its earnings forecast for 2025, projecting EPS to be between $7.60 and $7.90. However, tariffs are expected to negatively impact earnings, reducing them by 20 to 40 cents per share. Despite this challenge, 3M's Chairman and CEO, William Brown, expressed satisfaction with the company's performance, highlighting positive organic sales growth and better-than-expected margins.
3M's stock has experienced a decline recently, with a 1.43% decrease year-to-date and a significant 14.98% drop over the past month. The technical analysis suggests a bearish outlook as the stock trades at $127.23, below its short and medium-term moving averages. However, it remains above its 200-day moving average of $114.00, indicating potential long-term bullish trends.
3M's financial metrics include a price-to-earnings (P/E) ratio of approximately 16.43 and a price-to-sales ratio of about 2.56. The company's debt-to-equity ratio is notably high at 3.39, suggesting a significant reliance on debt financing. Despite this, 3M maintains a current ratio of approximately 1.41, indicating its ability to cover short-term liabilities with short-term assets.
3M Company's Financial Performance Analysis
- 3M Company (NYSE:MMM) reported earnings per share (EPS) of $1.68, surpassing the estimated $1.67, indicating a positive growth trajectory.
- The company's revenue reached $6.01 billion, exceeding forecasts and showcasing its competitive edge in the industrial sector.
- Despite a high debt-to-equity ratio of 3.39, 3M maintains a healthy current ratio of 1.41, reflecting its ability to manage short-term obligations.
3M Company, listed on the NYSE under the symbol MMM, is a diversified technology and manufacturing company. It operates in various sectors, including industrial, safety, and consumer products. Known for its innovation, 3M competes with companies like Honeywell and GE in the industrial sector. On January 21, 2025, 3M reported earnings per share (EPS) of $1.68, surpassing the estimated $1.67.
The company's revenue reached $6.01 billion, exceeding the forecasted $5.78 billion. This performance suggests that 3M is experiencing growth, as highlighted by Barron's. The company's price-to-earnings (P/E) ratio is approximately 19.16, indicating how much investors are willing to pay for each dollar of earnings. A P/E ratio of 19.16 suggests moderate investor confidence in 3M's future earnings potential.
3M's price-to-sales ratio is about 3.02, which shows the value investors place on each dollar of the company's sales. The enterprise value to sales ratio is around 3.30, reflecting the company's total value, including debt, relative to its sales. The enterprise value to operating cash flow ratio is notably high at 48.22, indicating that the company's valuation is high compared to its cash flow from operations.
The earnings yield for 3M is approximately 5.22%, which is the inverse of the P/E ratio and represents the percentage of each dollar invested that was earned by the company. The company's debt-to-equity ratio is quite elevated at 3.39, indicating a significant level of debt compared to its equity. This suggests that 3M relies heavily on debt financing, which could be a risk if interest rates rise or if the company faces financial difficulties.
3M maintains a current ratio of about 1.41, suggesting it has a reasonable level of liquidity to cover its short-term liabilities. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally a positive sign of financial health. This liquidity position allows 3M to manage its short-term obligations effectively.
3M Company's Financial Performance Analysis
- 3M Company (NYSE:MMM) reported earnings per share (EPS) of $1.68, surpassing the estimated $1.67, indicating a positive growth trajectory.
- The company's revenue reached $6.01 billion, exceeding forecasts and showcasing its competitive edge in the industrial sector.
- Despite a high debt-to-equity ratio of 3.39, 3M maintains a healthy current ratio of 1.41, reflecting its ability to manage short-term obligations.
3M Company, listed on the NYSE under the symbol MMM, is a diversified technology and manufacturing company. It operates in various sectors, including industrial, safety, and consumer products. Known for its innovation, 3M competes with companies like Honeywell and GE in the industrial sector. On January 21, 2025, 3M reported earnings per share (EPS) of $1.68, surpassing the estimated $1.67.
The company's revenue reached $6.01 billion, exceeding the forecasted $5.78 billion. This performance suggests that 3M is experiencing growth, as highlighted by Barron's. The company's price-to-earnings (P/E) ratio is approximately 19.16, indicating how much investors are willing to pay for each dollar of earnings. A P/E ratio of 19.16 suggests moderate investor confidence in 3M's future earnings potential.
3M's price-to-sales ratio is about 3.02, which shows the value investors place on each dollar of the company's sales. The enterprise value to sales ratio is around 3.30, reflecting the company's total value, including debt, relative to its sales. The enterprise value to operating cash flow ratio is notably high at 48.22, indicating that the company's valuation is high compared to its cash flow from operations.
The earnings yield for 3M is approximately 5.22%, which is the inverse of the P/E ratio and represents the percentage of each dollar invested that was earned by the company. The company's debt-to-equity ratio is quite elevated at 3.39, indicating a significant level of debt compared to its equity. This suggests that 3M relies heavily on debt financing, which could be a risk if interest rates rise or if the company faces financial difficulties.
3M maintains a current ratio of about 1.41, suggesting it has a reasonable level of liquidity to cover its short-term liabilities. A current ratio above 1 indicates that the company has more current assets than current liabilities, which is generally a positive sign of financial health. This liquidity position allows 3M to manage its short-term obligations effectively.
3M Company's Upcoming Quarterly Earnings: A Financial Overview
- Earnings per Share (EPS) is anticipated to be $1.67, with projected revenue of approximately $5.77 billion.
- The Price-to-Earnings (P/E) ratio stands at 17.28, indicating moderate market confidence in 3M's earnings.
- Debt-to-Equity ratio is about 2.97, highlighting a higher reliance on debt financing.
3M Company (NYSE:MMM) is a diversified technology and manufacturing company known for its wide range of products, including adhesives, abrasives, and personal protective equipment. As a major player in the industrial sector, 3M competes with companies like Honeywell and General Electric. The company is set to release its quarterly earnings on January 21, 2025, before the market opens.
Wall Street anticipates 3M's earnings per share (EPS) to be $1.67, with projected revenue of approximately $5.77 billion. However, analysts are delving deeper into other financial metrics to assess the company's performance for the quarter ending December 2024. This comprehensive analysis aims to provide a clearer picture of 3M's financial health and future prospects.
3M's price-to-earnings (P/E) ratio is around 17.28, indicating how the market values its earnings. A P/E ratio of this level suggests that investors are willing to pay $17.28 for every dollar of earnings, reflecting moderate market confidence. The price-to-sales ratio of 2.63 shows the company's market value relative to its revenue, while the enterprise value to sales ratio of 2.90 highlights its total valuation compared to sales.
The enterprise value to operating cash flow ratio stands at a high 41.66, suggesting that the market places a significant premium on 3M's cash flow generation. This could indicate expectations of strong future cash flows. The earnings yield of 5.79% provides insight into the return on investment for shareholders, offering a perspective on the company's profitability.
3M's debt-to-equity ratio is about 2.97, indicating a higher reliance on debt financing compared to equity. This level of debt could pose risks if not managed carefully. The current ratio of 1.43 suggests that 3M has a reasonable ability to cover its short-term liabilities with its short-term assets, reflecting a stable liquidity position.
