3M First-Quarter Results Driven by Strong Operational Performance; Company Initiates Full-Year 2024 Guidance Reflecting Completion of Solventum Spin
3M reported strong first-quarter results with sales of $8.0 billion, down 0.3% YoY, and adjusted sales of $7.7 billion, reflecting organic growth of approximately 1% YoY. GAAP earnings per share were $1.67, down 5% YoY, while adjusted earnings were $2.39, up double digits YoY. The company completed the spin of Solventum, finalized legal settlements, and named a new CEO. 3M initiated guidance for 2024, reflecting Solventum as a discontinued operation.
Organic growth of approximately 1% YoY in adjusted sales.
Double-digit adjusted earnings growth YoY.
Completed spin of Solventum and settled legal agreements.
Initiated 2024 guidance reflecting Solventum as discontinued operation.
Sales down 0.3% YoY.
GAAP earnings per share decreased by 5% YoY.
Total sales growth forecasted to be negative for 2024.
Adjusted earnings per share expected to decrease for 2024.
Insights
Upon scrutinizing 3M's quarterly report, market participants are likely to focus on the adjusted EPS growth (Earnings Per Share) which saw an increase of
The spin-off of Solventum could be seen as a strategic realignment, potentially unlocking shareholder value by allowing each entity to focus on its core competencies. Retaining a
Lastly, the resolution of major litigations concerning Public Water Suppliers and Combat Arms Earplugs removes significant uncertainty for the company and its shareholders. The financial consequences have already been accounted for in reserves, which may be viewed favorably by investors seeking to quantify risk.
The finalization of 3M's legal settlements is a pivotal moment, as it encapsulates the culmination of high-profile disputes that had cast a shadow on the company's financial health. With the settlements structured over multiple years, the impact on cash flow will be spread out, mitigating the strain on short-term liquidity. However, it is essential for shareholders to understand that such provisions, although non-recurring, will inform the company's capital allocation and could influence dividend policies and investment in growth opportunities.
When analyzing 3M's performance, it is important to consider the broader industrial landscape. The company's relatively flat organic sales growth amidst industry-wide challenges, such as supply chain disruptions and fluctuating demand cycles, may actually underscore resilience. However, investors must juxtapose this with the fact that 3M is not immured against macroeconomic trends and future performance will be contingent upon the company's adaptability to changing market conditions. Moreover, the updated guidance offers a conservative sales growth forecast, suggesting 3M is cognizant of potential headwinds and is setting calibrated expectations.
- Company delivers strong first quarter results:
- Sales of
$8.0 billion 0.3% YoY; adjusted sales of$7.7 billion 1% YoY - GAAP earnings per share of
$1.67 5% YoY; adjusted earnings of$2.39
- Sales of
- Successfully completed the spin of Solventum on April 1st
- Finalized legal settlements for Public Water Suppliers and Combat Arms Earplugs
- Initiates guidance on a continuing operations basis and updates capital allocation framework
- Named William "Bill" Brown as CEO effective May 1st; Mike Roman will become Executive Chairman
"We delivered results that were better than our expectations as we returned to organic growth and achieved double digit adjusted earnings growth. We improved performance in our businesses through strong operational execution, completed the spin-off of Solventum, and finalized two major legal settlements," said 3M chairman and CEO Mike Roman. "The progress we have made in executing our strategic priorities, positions the company for long-term shareholder value creation as Bill Brown assumes the role of 3M CEO."
First-Quarter Highlights:
- Q1 2024 results are reported inclusive of the Health Care business segment, on the same basis on which 3M provided its first-quarter guidance.
Q1 2024 | Q1 2023 | |||||||
GAAP earnings per share | $ 1.67 | $ 1.76 | ||||||
Special items: | ||||||||
Net costs for significant litigation | 0.44 | 0.07 | ||||||
Other special items, net | 0.28 | 0.14 | ||||||
Adjusted earnings per share (EPS) | $ 2.39 | $ 1.97 | ||||||
Memo: | ||||||||
GAAP operating income margin | 18.8 % | 15.4 % | ||||||
Adjusted operating income margin | 21.9 % | 17.9 % |
- GAAP earnings per share of
$1.67 18.8% . - Adjusted EPS of
$2.39 - Adjusted operating income margin of
21.9% , an increase of 4.0 percentage points year-on-year.
GAAP | Adjusted (Non-GAAP) | |||||||
Net sales (Millions) | ||||||||
Sales change | ||||||||
Total sales | (0.3) % | 0.5 % | ||||||
Components of sales change: | ||||||||
Organic sales1 | — % | 0.8 % | ||||||
Acquisitions/divestitures | 0.3 % | 0.3 % | ||||||
Translation | (0.6) % | (0.6) % | ||||||
Adjusted sales excludes manufactured PFAS products. | ||||||||
1Above adjusted organic sales increase includes a 160 basis point headwind from product portfolio initiatives, | ||||||||
- Sales of
$8.0 billion - Adjusted sales of
$7.7 billion - Operating cash flow of
$0.8 billion $0.8 billion - 3M returned
$835 million
This document includes reference to certain non-GAAP measures. See the "Supplemental Financial Information Non-GAAP Measures" section for applicable information.
3M Completes Spin-off of Solventum
On April 1, 3M completed the planned spin-off of its health care business, which formally launched Solventum Corporation as an independent company. Solventum is listed on the New York Stock Exchange as SOLV. 3M retained
Solventum Corporation's financial reporting will differ from the basis of presentation used by 3M for the Health Care segment.
3M Resolves Public Water Supplier and Combat Arms Earplugs Litigation
On March 29, the company's previously announced settlement agreement with
On March 26, 3M announced that, as of the final registration date for the Combat Arms Earplug settlement agreement, more than
Initiating Full-Year 2024 Earnings Outlook Reflecting Solventum as a Discontinued Operation
3M initiated the following full-year 2024 expectations. Beginning in the second quarter of 2024, Solventum's historical earnings results will be reported within 3M's financial statements as discontinued operations. The 2024 earnings outlook below reflects Solventum's net income as discontinued operations for the full year, including the first quarter of 2024.
Reflecting Solventum as discontinued operation | |||||||||
2023 as reported | 2023 illustrative2 | 2024 forecast3 | |||||||
Total sales growth | (4.5) % | (5.9) % | |||||||
Adjusted total sales growth | (4.5) % | (6.0) % | ( | ||||||
Adjusted organic sales growth | (3.2) % | (4.4) % | flat to + | ||||||
Earnings (loss) per share | $ (12.63) | ~( | |||||||
Adjusted earnings per share | $ 9.24 | ||||||||
In addition, following the spin of Solventum, 3M's dividend payout ratio is expected to be approximately
23M is supplying preliminary estimated information that is illustrative as if Solventum's net income was reflected as a discontinued operation. This information is preliminary, unaudited, and based on current estimates, and remains subject to change. See further discussion in the "Supplemental Financial Information Non-GAAP Measures - Reflecting Solventum Net Income as Discontinued Operation" section. |
3As further discussed at 10 within the "Supplemental Financial Information Non-GAAP Measures" sections, 3M cannot, without unreasonable effort, forecast certain items required to develop meaningful comparable GAAP financial measures and, therefore, does not provide them on a forward-looking basis reflecting these items. |
Conference Call
3M will conduct an investor teleconference at 9 a.m. EDT (8 a.m. CDT) today. Investors can access this conference via the following:
- Live webcast at https://investors.3M.com
- Live telephone:
Call 800-343-4136 within theU.S. or +1 203-518-9843 outside theU.S. , conference ID: MMMQ124. Please join the call at least 10 minutes before the start time. - Webcast replay at https://investors.3m.com/financials/quarterly-earnings
- Telephone replay:
Call 800-839-7076 within theU.S. or +1 402-220-6063 outside theU.S. (for bothU.S. and outside theU.S. , the security code is 6639). The telephone replay will be available until May 7, 2024.
Consolidated Financial Statements and Supplemental Financial Information Non-GAAP Measures
View the Financial Statement Information on 3M's website: https://investors.3m.com/financials/quarterly-earnings
Forward-Looking Statements
This news release contains forward-looking statements. You can identify these statements by the use of words such as "plan," "expect," "aim," "believe," "project," "target," "anticipate," "intend," "estimate," "will," "should," "could," "would," "forecast" and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions and other factors beyond the Company's control, including inflation, recession, military conflicts, and natural and other disasters or climate change affecting the operations of the Company or its customers and suppliers; (2) foreign currency exchange rates and fluctuations in those rates; (3) liabilities and the outcome of contingencies related to certain fluorochemicals; known as "PFAS," including liabilities related to claims, lawsuits, and government regulatory proceedings concerning various PFAS-related products and chemistries, as well as risks related to the Company's plans to exit PFAS manufacturing and discontinue use of PFAS across its product portfolio; (4) risks related to the class-action settlement to resolve claims by public water systems in
About 3M
3M (NYSE: MMM) believes science helps create a brighter world for everyone. By unlocking the power of people, ideas and science to reimagine what's possible, our global team uniquely addresses the opportunities and challenges of our customers, communities, and planet. Learn how we're working to improve lives and make what's next at 3M.com/news.
Please note that the company announces material financial, business and operational information using the 3M investor relations website, SEC filings, press releases, public conference calls and webcasts. The company also uses the 3M News Center and social media to communicate with our customers and the public about the company, products and services and other matters. It is possible that the information 3M posts on the News Center and social media could be deemed to be material information. Therefore, the company encourages investors, the media and others interested in 3M to review the information posted on 3M's news center and the social media channels such as @3M or @3MNews.
Contacts
3M
Investor Contacts:
Bruce Jermeland, 651-733-1807
or
Diane Farrow, 612-202-2449
or
Eric Herron, 651-233-0043
Media Contact:
Sean Lynch, slynch2@mmm.com
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SOURCE 3M Company
FAQ
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