3M Company MMM is scheduled to release third-quarter 2024 results on Oct. 22, before market open.

The Zacks Consensus Estimate for earnings is pegged at $1.93 per share, reflecting an increase of 0.5% in the past 60 days. The consensus mark implies a 28% decline from the year-ago reported actuals. The Zacks Consensus Estimate for revenues is pegged at $6.1 billion, indicating a 26.6% decrease year over year.

Estimate Movement

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It is worth noting that in April 2024, 3M completed the spin-off of its Health Care business into a separate public company. Notably, the spin-off is likely to have weighed on MMM’s year-over-year top-line comparison in the quarter.

Despite the unfavorable impacts of the Health Care spin-off, the company’s third-quarter performance is likely to have benefited from strength across its end markets, channel inventory normalization, solid operational execution and cost-saving initiatives.

3M has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 12.6%. In the last reported quarter, it delivered an earnings surprise of 16.3%.

3M’s Earnings Surprise History

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Earnings Whispers

Our proven model predicts an earnings beat for 3M this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as elaborated below.

Earnings ESP: MMM has an Earnings ESP of +1.81% as the Most Accurate Estimate is pegged at $1.97 per share, which is higher than the Zacks Consensus Estimate of $1.93. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: 3M presently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Shaping Quarterly Performance

Strength in electronics, automotive, aerospace, commercial branding and transportation end markets is expected to have augmented the Transportation and Electronics segment’s revenues in the third quarter. Continued channel inventory normalization, supported by strong growth in electronics demand, is likely to have driven its performance. Also, solid demand for its products in the automotive electrification market, supported by an increase in auto OEM (original equipment manufacturer) build rates, might have been a tailwind for the segment.

Improvement in demand across end markets is anticipated to have been a tailwind for 3M’s industrial adhesives & tapes, personal safety and automotive aftermarket businesses under the Safety and Industrial segment. However, weakness across the abrasives and industrial specialties markets is likely to have been a spoilsport. The Zacks Consensus Estimate for Safety and Industrial segment revenues is pegged at $2.79 billion, indicating a 1.4% increase from the year-ago number.

The company is expected to have benefited from its restructuring actions, including headcount reduction, which are likely to have reduced costs and improved margins in the quarter. Its restructuring savings and spending discipline are also likely to have boosted its margins and profitability.

Despite the positives, weakness in 3M’s packaging and expression as well as home and auto care businesses is likely to have dragged its performance. Lower consumer retail discretionary spending on hardline goods is likely to hurt its Consumer segment’s results. The consensus mark for the Consumer segment’s revenues is pegged at $1.31 billion, indicating a 0.8% decline from the year-ago number.

Given the company’s extensive geographic presence, its operations are subject to foreign exchange headwinds. A stronger U.S. dollar is also likely to have hurt 3M’s overseas business.

Price Performance & Valuation

MMM’s shares have exhibited an uptrend in the past three months, outperforming its peers and the Zacks Diversified Operations industry. The conglomerate giant’s shares have surged 30.6%, outperforming the industry’s and the S&P 500’s growth of 1.8% and 5.6%, respectively. The company’s peers Honeywell International Inc. HON and Federal Signal Corporation FSS have gained 2.3% and 2.4%, respectively, in the same period.

MMM Outperforms Industry, S&P 500 & Peers

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In terms of valuation, MMM’s forward 12-month price-to-earnings (P/E) is 17.55X, a premium to its industry average of 16.17X. This indicates that investors will be paying a higher price than the company’s expected earnings growth compared with its peers. Also, the stock is overvalued compared with its peer, Griffon Corporation GFF, which is trading at 11.88X.

Price-to-Earnings (Forward 12 Months)

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Investment Thesis

3M’s robust and diversified portfolio encompassing industrial abrasives, automotive components, electrical products and packaging materials, along with strength in its segments, is likely to drive its growth. The company’s ongoing restructuring actions are expected to improve margins and cash flow in the long run. It expects these actions to be completed by 2025 and yield annual pre-tax savings. Also, its commitment to rewarding its shareholders handsomely through dividend payments and share buybacks adds to its strength.

However, weakness in the packaging and expression as well as home and auto care businesses remains concerning for its near-term performance. The company has been subject to several litigations, including earplug lawsuits. It has committed substantial funds to resolve these disputes as ongoing litigation might lead to additional expenses.

Also, a high debt level, if not controlled, is likely to be a drag on 3M’s profitability. Exiting the second-quarter 2024, the company’s long-term debt was high at $11.8 billion. This is evident from its long-term debt-to-capital ratio compared with its industry.

MMM’s Long-Term Debt-to-Capital

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Should You Buy 3M Stock Now?

Investors interested in 3M stock should wait for a better entry point, considering its premium valuation and the challenges it is facing in the retail market. Also, a VGM Score of D does not reflect major strength in the stock.

One should monitor the stock’s developments closely before buying it, as an erroneous and hasty decision could affect portfolio gains. Therefore, it might be prudent to wait for MMM’s earnings report before making an investment decision.

However, those who already own this stock may stay invested as the company’s upbeat estimates, strong share price returns and strength across most end markets offer solid long-term prospects.

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