What happened
Shares in industrial conglomerate 3M (MMM 2.76%) declined by more than 3% by midday today. The move comes after a disappointing earnings report and guidance from home improvement store The Home Depot.
So what
If you are wondering what home improvement has to do with an industrial stock, it's worth remembering that 3M's consumer business group is one of its four operating segments. Moreover, with $538 million in sales in the fourth quarter, 3M's home-improvement-related sales are responsible for around 43% of the segment's sales.
Key Data Points
In addition, if there's weakness in spending in an interest-rate-sensitive sector like housing, it could cross over into another significant end market for 3M, namely automotive. 3M's automotive exposure is spread across three segments: consumer, transportation and electronics, and safety and industrial.
Now what
Management's full-year guidance range is for organic sales to decline by 3% to being flat in 2022, with organic sales in the consumer business group declining by low single digits to being flat in 2022. In addition, management guided toward first-quarter sales of $7.2 billion to $7.6 billion.
Given 3M's recent history of missing guidance and growing investor dissatisfaction with its management, the market will closely follow when, under fire, the company's CEO Mike Roman and CFO Monish Patolawala present at an investor conference tomorrow. They will likely be questioned on current trading conditions and the first-quarter and full-year assumptions discussed above.
Don't be surprised if management, at the very least, acknowledges ongoing softness in the consumer segment as well as the transportation and electronics segments. Stay tuned.
