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3M stock surges after profit, sales beat expectations in Q1

 

3M stock leaps in premarket hours on stellar Q1 report

3M stock surged in premarket trading Tuesday, poised to reach their highest levels in over a year, following a Q1 earnings report that exceeded Wall Street expectations.

3M stock, which trades on the NYSE under the ticker MMM, climbed by as much as 7.8% in premarket hours on Tuesday, putting it on track to open around its highest closing price since February 2, 2023.

MarketWatch cited outgoing CEO Mike Roman commenting on the report:  

“We delivered results that were better than our expectations as we returned to organic growth and achieved double digit adjusted earnings growth. We improved performance in our businesses through strong operational execution, completed the spinoff of Solventum, and finalized two major legal settlements.”

The results — and stock price gains — come during a busy start of the year for 3M. The company recently finalized two major legal settlements, including a $10.3 billion agreement over the contamination of drinking water with "forever chemicals" and an agreement to pay $6 billion to resolve Combat Arms earplug litigation.

The company is also replacing its CEO. Bill Brown will assume the role of chief executive on May 1, succeeding Mike Roman, who served in the position for six years. Brown takes the helm of a restructured 3M following the April 1 spinoff of its healthcare division into Solventum Corp.

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3M earnings in Q1 2024: EPS, sales, beat Wall Street estimates

Minnesota-based 3M, known for products such as Post-it Notes, Scotch tape, N95 masks, and Command strips, reported a decrease in net income to $928 million, or $1.67 per share, down from $976 million, or $1.76 per share, a year earlier.

However, adjusted earnings of $2.39 per share, which exclude nonrecurring items like litigation costs, surpassed the FactSet analyst consensus of $2.10 in Q1 2024. The figures come as a relief for the firm, as 3M stock tanked several months ago, posting its biggest loss in 5 years following a profit warning for 2024.

While overall sales dipped slightly by 0.3% to $8.00 billion, they still exceeded analyst expectations of $7.63 billion. The decline in the safety and industrial and consumer segments was offset by gains in transportation, electronics, and healthcare.

Ahead of this quarter, there was speculation that 3M might cut its dividend, which has been raised annually for 64 years. Despite these concerns, the dividend yield at Monday's close was 6.55% — more than four times higher than the S&P 500 index average of 1.44%.

3M average dividend payout ratio expected to fall

 

3M average dividend payout ratio expected to fall

On Tuesday, 3M announced that after the spinoff of its healthcare division, Solventum Corp., the company expects a dividend-payout ratio of around 40% of adjusted free cash flow, with Q2 dividend expected to be declared in May 2024.  

This marks a decrease from the average payout ratio of just over 57% maintained over the previous decade, according to a recent note from CFRA analyst Jonathan Sakraida, which was cited by MarketWatch earlier today.

For 2024, 3M said it expects adjusted EPS, with Solventum results reported as discontinued operations, of $6.80 to $7.30. 3M’s previous EPS guidance of $9.35 to $9.75 included Solventum results.

At the time of writing on April 30, 3M stock was trading at $98.97 (up 7.4%) in premarket hours. 3M stock has increased by 0.8% year-to-date, while the Dow Jones Industrial Average, of which 3M is a constituent, has risen by 1.9%.


When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.  

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.

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