3M Stock Is Tumbling After Earnings Disappointed

Wall Street was looking for earnings per share of about $2.36 on sales of $8.1 billion.

For 2022, 3M earned $10.10 a share. Excluding the impact of business sales, the company earned about $9.88 a share. The adjusted number is still above what the company expects to earn in 2023. Guidance for the new year calls for per share earnings to come in between $8.50 and $9. Wall Street is projecting about $10.20.

“The outlook for $8.50 to $9.00 in [2023 earnings per share] may be conservative, but [downward] Street revisions of 15% likely drive underperformance,” wrote Wolfe analyst Nigel Coe in a Tuesday report. He rates 3M stock Sell and has a $124 price target for shares.

3M stock is down about 4.8% in Tuesday trading at $116.74. The S&P 500 is flat while the Dow Jones Industrial Average is off about 0.2%.

For 2023, 3M sales are expected to fall between 2% and 6% compared with 2022. Consumer electronics demand is down “significantly” and there is “near-term weakness in consumer discretionary spending [with] retailers aggressively reducing inventory levels.”

Growth has slowed for the company in recent years. Between 2013 and 2018 reported earnings per share grew at an average annual rate of about 8%. Based on current estimates, earnings will grow at an average annual rate of about 2% between 2018 and 2023.

3M is laying off about 2,500 manufacturing employees in response to the weak operating environment. The company is facing some challenges that go beyond the consumer.

3M faces lawsuits over potentially faulty earplugs sold to the military made by a subsidiary called Aearo Technologies. It is also facing cleanup and legal liabilities stemming from chemicals, referred to as PFAS, manufactured by the company that found their way into water supplies.

“3M continues to support Aearo Technologies in this ongoing confidential mediation process,” said CEO Mike Roman on the company’s earnings conference call. “We continue to address PFAS litigation by defending ourselves in court or negotiating resolutions as appropriate.”

Legal risks continues to dominate investor sentiment, added Coe in his report. There were no major announcements about legal liabilities on 3M’s conference call.

Previous to the latest report, options markets had implied 3M stock would move about 3%, up or down, after earnings were disclosed. Shares have moved an average of about 2%, up or down, over the four most recent previous quarterly reports, having risen three times and fallen once.

Coming into Tuesday trading, 3M stock was down about 28% over the past 12 months. The S&P 500 and Dow Jones Industrial Average were down about 8% and 2% over the same span, respectively.

Write to Al Root at allen.root@dowjones.com