The stock market has posted a solid advance so far in 2023, even though investors have generally remained downbeat about the immediate prospects for economic growth. Despite calls for a possible recession, the Dow Jones Industrial Average (^DJI 0.40%) has recovered from losses in early March and is now up 2% for the year. Many of its 30 stock components have fared even better.
The Dow looked as though it would fall along with the rest of the market on Tuesday morning, based on early trading in stock index futures. However, Dow components McDonald's (MCD -0.91%) and 3M (MMM 0.46%) released their latest financial results early Tuesday, and investors in those two stocks seemed more optimistic about the future prospects for their respective companies. Below, you'll learn more about what McDonald's and 3M said and what it means for the Dow Jones Industrials more broadly.
McDonald's looks golden
Shares of McDonald's were up about 1% in premarket trading. The fast-food pioneer released first-quarter financial results that proved just how much pricing power it has in fighting against inflationary pressures.
McDonald's numbers for the quarter looked healthy. Revenue rose 4% year over year despite facing about 4 percentage points of currency-related headwinds. Global comparable sales jumped 12.6%, as systemwide sales at McDonald's franchise locations climbed 9% from year-ago levels. Adjusted earnings of $2.63 per share rose 15% from the first quarter of 2022.
The fast-food giant cited several elements that contributed to its overall success. In the U.S. market, selective increases in menu prices didn't stop the company from seeing growth in traffic. Effective marketing, smart operational moves, and ongoing gains in digital and delivery-related sales all helped to bolster McDonald's numbers.
When investors worry about a possible recession, McDonald's is often a beneficiary, as investors have seen patrons shift down from more expensive fast-casual restaurant chains to visit the Golden Arches. Even in tough times, people still want to eat out, and strategic moves with the McDonald's menu have helped support the fast-food chain's growth over the long haul.
3M looks to rein in costs
Shares of 3M were up more than 1% early Tuesday morning. The industrial conglomerate reported first-quarter financial results that reflected some of the pressures that it's facing, but it also made moves to restructure its operations in an effort to keep expenses under control and bolster profitability.
3M's financials from the first quarter didn't look all that great. Revenue of $8 billion was down 9% year over year, as a combination of business divestitures and a 4.9% drop in organic sales weighed on 3M's top line. Despite a 24% rise in adjusted free cash flow, earnings came in at $1.97 per share on an adjusted basis, and that was down 25% compared to the first quarter of 2022.
In order to get its financial performance back in gear, 3M announced that it would streamline its global operations, cutting back on layers of management and reducing the size of its central corporate offices. The result will be 6,000 job cuts across the globe, adding to the 2,500 positions eliminated at the beginning of 2023. With the move, 3M hopes to free up $700 million to $900 million per year in cost savings.
3M sees ongoing pressure throughout 2023, with sales falling 2% to 6% and adjusted earnings of $8.50 to $9 per share representing a sizable drop from the more than $10 per share 3M earned in 2022. However, investors seem patient with the industrial giant and hope that 3M's efforts will prove sufficient to get the stock out of its six-year slump.
