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3M Tumbles as Industrial Weakness Forces Another Forecast Cut

Oct. 24, 2019
The company blamed a weak automotive market, high raw-material prices, and the trade war with China.

3M Co. dropped the most in six months after slashing its profit and sales outlooks -- the latest sign that a global industrial downturn is hobbling the manufacturer.

Adjusted earnings will be no more than $9.09 a share this year, below even the $9.25 bottom of the previous range, the company said Thursday in a statement. Analysts had been predicting $9.31, according to the average of estimates compiled by Bloomberg.

“3M posted broadly disappointing third-quarter operating results and lowered its full-year EPS guidance once again, representing the fifth guidance cut in the past seven quarters,” Deane Dray, an analyst at RBC Capital Markets, said in a note. “If investors were bracing for a tough operating macro across the sector in the third quarter, 3M’s results confirmed those worries.”

The diminished outlook deepens the challenge for 3M, a poster child for the manufacturing slowdown that has cut its guidance multiple times since Chief Executive Officer Mike Roman took the helm last year. The maker of Post-it notes, adhesives and touchscreen displays has cited obstacles from a weak automotive market, to high raw-material prices, to headwinds in China.

“The macroeconomic environment remains challenging,” Roman said in Thursday’s statement. “We’ll continue to focus on driving operational improvements and investing for the future.”

3M slid 5.2% to $160.02 at 10:16 a.m. in New York after declining 5.3%, the most intraday since April 25 and Thursday’s worst performance in the Dow Jones Industrial Average. The stock fell 11% this year through Wednesday, the industrials’ third-weakest showing.

Sales dropped 2% in the third quarter to $8 billion, missing the average analyst estimate of $8.17 billion. Profit rose to $2.72 a share, which includes a 14-cent gain from a divestiture, 3M said.

The revenue figure was hurt by a 5% decline in the Asia-Pacific region. Sales dropped in the safety division and the transportation and electronics unit as well. Health care again proved to be a bright spot for 3M, with revenue rising 4.7%.

Weak Demand

The softer demand prompted the St. Paul, Minnesota-based company to cut its sales expectations for this year. Organic revenue in local currency will decline between 1% and 1.5%, down from a previous projection for growth of as much as 2%.

The revised adjusted-profit forecast accounts for the recent acquisition of Acelity to its health-care portfolio, which hadn’t been previously included. The outlook excludes litigation-related charges as well as the impact of a divestiture and the deconsolidation of a Venezuelan subsidiary, 3M said.

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