What happened 

Shares of industrial giant 3M Co (NYSE:MMM) had a rough start to the day, falling 8.8% Tuesday, after reporting earnings for the first quarter of 2018. Results were better than expected, but guidance was pulled back a bit and that was enough to send investors running for the hills. The decline seemed to pick up the pace as the day went on and at 1:15 p.m. EDT shares were down 8.6% and near their low for the day.

So what

First-quarter results weren't terrible by any measure with revenue up 7.7% versus a year ago to $8.3 billion and adjusted net income jumping 15.7% to $2.50 per share. Analysts were expecting $8.25 billion in revenue and earnings of $2.51 per share, so results were about on par with what the market was thinking.

Industrial equipment in a factory.

Image source: Getty Images.

What surprised investors was management pulling in the top end of full-year organic growth guidance by 1 percentage point, leaving the range at 3% to 4% organic growth expected for the year. Earnings guidance was also tightened from $10.20 to $10.70 per share to a new range of $10.20 to $10.55 per share. Management had indicated previously that earnings might be at the low end of guidance, but this was proof that the year probably won't be as strong as some investors had hoped.

Now what

I wouldn't be too alarmed by the move in 3M's stock because it was only a modest reduction in the top end of organic growth and earnings guidance. One reason for lowering the bar may have been the recent announcement of Mike Roman as CEO, who management wants to set up for success long term. It's easier to hurdle over a lower guidance number than have your first few quarters be "disappointments" and that background is why I wouldn't be alarmed at 3M's earnings or guidance today. 

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