3M Beats Estimates But Lowers Full-Year Projections


3M (NYSE:MMM) announced quarterly results that exceeded Wall Street analysts’ expectations but still fell short of the company’s own projections.

In addition to producing adjusted earnings per share of $2.48, which is down 4.3% from the same quarter last year, 3M (NYSE:MMM) topped analysts’ sales projections of $8.58 billion by reporting adjusted earnings of $8.7 billion, which is down roughly 3% from the same quarter last year.

The company said its sales were negatively impacted by the dollar rising by 4%. 

Additionally, due to a decline in the demand for single-use respirators and the effects of Chinese COVID-related closures, organic growth was only 1% higher than it was the previous year.

Thus, adjusted free cash flow was $1.0 billion, down 41% from the preceding year, and operating cash flow was $1.1 billion, down 40% from the prior year. 

Operating margins shrank throughout the quarter as a result of a considerable increase in general and administrative costs.

Due to the strong currency and deteriorating macroeconomic conditions, 3M has revised its projections for full-year sales and earnings.

Compared to the earlier forecast of 1 to 4 percent, total sales growth is now anticipated to be between 0.5 and 2.5 percent. In addition, instead of the earlier projection of 2 to 5 percent, organic sales growth is now anticipated to range from 1.5 to 3.5 percent.

The company also announced that GAAP profits per share are anticipated to range from $7.32 to $7.82, down from the earlier projection of $9.89 to $10.39. As opposed to the earlier forecast of $10.75 to $11.25, adjusted earnings per share are anticipated to be valued between $10.30 and $10.80.

In addition to its earnings results, 3M (NYSE:MMM) also announced a corporate restructuring.

3M to Split Off Healthcare Division

3M (NYSE:MMM) disclosed plans to split off its healthcare division and form two publicly traded entities.

With an emphasis on wound care, health informatics, oral care, and biopharmaceutical filtration, Health Care will be a market-leading, globally diversified healthcare technology firm.

In 2021, Health Care generated roughly $8.61 billion in revenue. The purpose of this spin-off is to establish a preeminent healthcare technology business with a broad and deep portfolio of reputable brands.

Currently, it is anticipated that Health Care will be spun off with net leverage of between 3.0 and 3.5 times EBITDA and be well-positioned for quick deleveraging. In addition, 3M intends to keep a 19.9% share in Health Care, which will eventually be sold off. By the end of 2023, 3M hopes to have the acquisition completed.

In other corporate news, 3M (NYSE:MMM) announced it will settle the legal dispute involving its Combat Arms version 2 earplugs. 3M promised to provide $1 billion toward the funding of a Trust for victims as well as an extra $240 million toward the case’s projected costs.

Market Reacts Positively

Since the start of the year, 3M (NYSE:MMM) stock has declined by 20%. Still, the market seemed to react positively to the company’s earnings report, registering +5% in opening trading hours.

The stock had fallen due to low expectations for it and litigation-related concerns, but the recent announcements by the company have helped alleviate investors’ concerns.

The business is currently pricing a slowdown in the American economy, but it is still a long way from discounting a serious recession. 

The corporation only touched lower figures between 2008–2009 and 2011–2012, according to a comparison of the present PS. 

With only 3 billion in cash and marketable securities and more than 14 billion in long-term debt, the company’s debt situation is not good. 

The bottom line is that 3M (NYSE:MMM) has shown its toughness, but there are still many concerns about its ability to withstand a further decline, especially in a worst-case scenario where a recession occurs.

Featured Image: Megapixl @Wellesenterprises

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