With the second quarter having come to a close, it's time to look at what industrial giant 3M (MMM 2.21%) might report in its results and what investors can expect for the rest of the year from the company.

Given the breadth of the company's exposure to the economy and its size, management's commentary and the company's results will likely interest a wide range of investors. 

Will guidance be cut? 

The company continues to face a challenging year, and as discussed previously, I don't think the 4.6% dividend yield is enough reason to buy the stock -- not least because 3M probably has some more bad news to report in 2022. 

Many other industrial companies cut guidance in response to cost headwinds and supply chain shortages on their first-quarter earnings calls. In contrast, 3M's management elected to maintain full-year guidance for organic revenue growth of 2% to 5% and adjusted earnings per share of $10.75-$11.25 in its first-quarter earnings call. However, 3M CEO Mike Roma subsequently updated investors in early June that conditions were more challenging in the second quarter than previously envisaged.

What Roman said at the Bernstein Strategic Decisions Conference cast doubt on 3M maintaining its full-year guidance. The combination of a $300 million hit to revenue from China's lockdowns, deterioration in auto production expectations, more-substantial-than-expected raw material cost inflation, and worse-than-anticipated supply chain challenges suggest 3M will lower at least the high end of its guidance. 

Is the company lagging with its pricing actions?

It's no secret a company's primary tool to combat rising costs is to increase prices, and 3M is no different. Management's main aim is to offset cost increases and rely on greater volumes to expand margin and profits. In the words of CFO Monish Patolawala on the first-quarter earnings call, "Volume gives us the best leverage, so the more we can grow, you're going to get more incremental leverage." Leverage refers to measuring how much more profits a company can make with a corresponding increase in revenue. Patolawala's comments highlight that 3M tends to favor going for volume increases rather than price increases. 

That's fair enough, but the reality is that 3M's pricing actions seem to be lagging inflation. Here's what Patolawala said on the last earnings call: "Last year, we started slow on pricing, 0.14%, went up to 1.4% in Q3 and 2.6% and in Q4." And for the first quarter, "we got a 3% plus price in the quarter. The team is very focused on looking at the extra inflation that's coming in; they're already working on higher price."

So the question is whether 3M is late on pushing through price increases. It's particularly relevant when some of its end markets, notably autos and electronics, are seeing their growth expectations reduced -- which might mean no volume impact on leverage coming through.

What about end markets?

Speaking of 3M's end markets, Roman's early-June presentation discussed lower expectations for automotive production and industrial output overall. In addition, he talked of "moderated" growth expectations for the transportation and electronics segment ($9.3 billion out of total company sales of $35.3 billion in 2021). 

As a reminder, management's existing guidance calls for low-to-high-single-digit organic revenue growth in 2022 -- a wide range to reflect the uncertainty going into 2022.

Organic revenue declined 0.3% in the first quarter, and its key end markets are slower than expected in 2022, so it's hard to see how 3M will get anywhere near the high end of the segment guidance.

3M faces a challenging year

Along with the rest of the industrial sector, 3M is facing a challenging year, and its second-quarter earnings report is unlikely to contain a lot of good news. There is a valuation case for buying the stock, but that might become more compelling after the company updates investors on its prospects for the rest of the year.