On October 24, 2023, 3M Co (MMM, Financial) released its third-quarter earnings report for 2023. Despite facing challenges, the company demonstrated strong operational execution, restructuring actions, and proactive spending discipline. The company's results reflect its continued execution of its priorities, including driving operational performance, spinning off Health Care, and reducing risk and uncertainty.
Financial Highlights
The company reported a GAAP loss per share of $3.74 and an operating margin of minus 31.9%, largely due to the previously announced settlement for Combat Arms, resulting in a pre-tax charge of $4.2 billion. However, the adjusted EPS of $2.68, which includes pre-tax restructuring-related charges of $68 million, was up 3 percent year-on-year. The adjusted operating income margin of 23.2% includes a 0.8 percentage point headwind from pre-tax restructuring-related charges.
3M's net sales for the quarter were $8.3 billion, down 3.6 percent year-on-year, with an organic sales decline of 3.7 percent year-on-year. Adjusted sales were $8.0 billion, down 3.0 percent year-on-year with an adjusted organic sales decline of 3.1 percent year-on-year. Despite these declines, the company's operating cash flow was up 25 percent year-on-year to $1.9 billion, and adjusted free cash flow was up 39 percent year-on-year to $1.9 billion.
Shareholder Returns and Outlook
During the quarter, 3M returned $828 million to shareholders via dividends. Based on the company's year-to-date performance and continued strong operational execution, 3M is raising its full-year 2023 adjusted EPS and adjusted free cash flow conversion expectations. The company anticipates adjusted EPS to be in the range of $8.95 to $9.15, up from the previous range of $8.60 to $9.10. Adjusted operating cash flow is estimated in the range of $6.5 to $6.9 billion, contributing to 100 to 110 percent adjusted free cash flow conversion.
Legal Matters and Restructuring
3M also addressed legal matters with the announced Combat Arms settlement and received preliminary court approval for the PFAS Public Water Systems agreement. The company is progressing with its Health Care spin-off, with leadership appointments already in place and an expected completion during the first half of 2024.
Despite the challenges faced in Q3 2023, 3M's strong operational execution and proactive spending discipline have positioned the company for a solid close to 2023. The company's strengths in material science innovation align with global trends in high-growth markets and sustainability, enabling it to develop indispensable products in attractive areas such as automotive electrification, climate technology, and industrial automation.
