3M (MMM, Financial) exceeded earnings per share (EPS) and revenue expectations in Q3 2024, driven by positive organic sales growth and improved operating margins. Despite this success, the stock struggled to gain traction due to a 30% rise since its last earnings report on July 25.
The earnings beat was modest compared to previous quarters, prompting some investors to lock in gains. However, under CEO William Brown's leadership, the company continues to trend positively.
- 3M achieved positive organic sales growth for the third consecutive quarter at +1.0%, a notable improvement from 2021 and 2022's negative growth.
- The Transportation & Electronics segment led the way with 3.9% organic growth, driven by a rebound in consumer electronics demand, despite challenges in automotive and aerospace markets.
- The Safety & Industrial segment benefited from strength in new home construction, with roofing granules sales up high-single-digits and adhesives and tapes rebounding mid-single-digits.
- The Consumer segment lagged, with a 2.0% year-over-year decline in organic sales due to weak demand for home office, packaging, and consumer safety products.
- After restructuring, including layoffs and the healthcare unit spin-off, 3M improved productivity and efficiency. Adjusted operating margin increased by 1.4 percentage points year-over-year to 23.0%, boosting adjusted EPS by 18%. The company raised its FY24 EPS outlook to $7.20-$7.30 from $7.00-$7.30.
The main takeaway is that 3M delivered a solid earnings report, showing improved execution despite challenges, including litigation over "forever chemicals."
