3M moves on with new CEO after legal settlements finalized and Solventum spinoff completed
3M’s stock charged up after an upbeat earnings report, with legal settlements and a healthcare spinoff now behind it.
Shares of 3M Co. rocketed to a record rally Friday, after the maker of Post-it Notes, Scotch tape and Command strips beat second-quarter earnings expectations and raised its full-year outlook.
“We delivered another strong quarter, with adjusted earnings growth up double-digits and robust cash generation,” said new Chief Executive Bill Brown. “I want to thank 3M employees for their exceptional execution, which we expect to continue in the second half of the year.”
The stock shot up 23% to a two-year high. That made for its biggest one-day gain on record, based on FactSet data available since January 1972.
The $23.77 price gain for the stock added about 156 points to the Dow Jones Industrial Average, which climbed 654 points, or 1.6%, on Friday.
The quarter marks a fresh start of sorts for the 122-year-old company. Legal settlements for “forever chemicals” in drinking water and its Combat Arms earplugs, which have been headwinds for years, and the spinoff of its healthcare business as Solventum Corp. are all now behind it.
Also during the quarter, Bill Brown became 3M’s new chief executive, succeeding Mike Roman, who was in the role for six years.
Brown noted on the post-earnings call with analysts that a number of organizational changes have also been made in an effort to boost results, including “shifting from a geographic to a global business-unit structure” and centralizing the company’s supply-chain activities.
According to a FactSet transcript, Brown said the company is also looking at ways to improve spending on research and development to “reinvigorate” new-product development, as well as continuing to invest in higher-growth markets such as electric vehicles, data centers and semiconductors.
3M swung to net income of $1.15 billion, or $2.07 a share, from a loss of $6.84 billion, or $12.35 a share, in the same period a year ago.
Excluding nonrecurring items, such as settlements and other litigation costs, adjusted earnings per share rose to $1.93, from $1.39, to beat the FactSet consensus of $1.68.
Total sales slipped 0.4% to $6.26 billion, but were above the FactSet consensus of $5.85 billion.
Among 3M’s business units, safety and industrial sales slipped 0.2% to $2.76 billion; transportation and electronics sales declined 2.2% to $2.14 billion; and consumer sales were down 2.3% to $1.26 billion.
Adjusted free cash flow for the quarter was $1.2 billion, up from $800 million in the first quarter but down from $1.5 billion a year ago.
Looking ahead, the company raised its guidance for adjusted EPS to $7.00 to $7.30, from $6.80 to $7.30, and reiterated its outlook for adjusted total sales growth at a range of down 0.25% to up 1.75%.
3M’s stock has now gained 38% this year to date, while the Dow has tacked on almost 8%.
