What happened
3M (MMM 2.74%) produced disappointing fourth-quarter earnings and said it intends to cut jobs due to softening global demand. Investors were disappointed, sending shares down as much as 5% on Tuesday morning.
So what
3M makes a range of industrial, consumer, and healthcare products, but that diversification was not enough to escape macroeconomic headwinds in the quarter. The company earned $2.28 per share in the last three months of 2022, short of the $2.36-per-share consensus estimate. Organic sales, a metric 3M uses to filter out currency fluctuations and the impact of mergers and divestitures, grew 0.4% in the quarter, well short of company expectations for 1% to 3% growth.
Executives said 3M is getting hit hard by a global slowdown.
"The slower-than-expected growth was due to rapid declines in consumer-facing markets -- a dynamic that accelerated in December -- along with significant slowing in China due to COVID-related disruptions," CEO Mike Roman said in a statement.
It's been a year of transition for 3M. The company divested its food safety business and announced the planned spinoff of healthcare, moves designed to focus the corporation and make 3M an easier company for investors to understand.
But that evolution will take time, and global conditions are not doing 3M any favors in the near term. The company said it now expects foreign currency translations to reduce sales in the current year by 4.5%, compared with its previous forecast of 4%.
Key Data Points
Now what
Roman said, "We expect macroeconomic challenges to persist in 2023," and 3M is acting now to get out ahead of the slowdown. The company said it would cut about 2,500 manufacturing jobs worldwide, a move that the CEO said is "a necessary decision to align with adjusted production volumes."
Indeed, 3M's outlook didn't give investors much reason for optimism. The company expects revenue to be down 2% to 6% in fiscal 2023, and earnings to come in within a range of $8.50 to $9 per share. Analysts had expected $10.22 per share in earnings this year prior to the results being released.
The good news for investors is that 3M is doing what it can to stay out in front of the challenges. The bad news is that it's hard to see a catalyst in the near term. For those intrigued by the promise of the business, patience will be required.
