3M Co. (NYSE: MMM) reported fourth-quarter and full-year 2019 results before markets opened Tuesday. For the quarter, the industrial giant posted adjusted diluted earnings per share (EPS) of $2.27 on revenues of $8.11 billion. In the same period a year ago, the company reported EPS of $2.31 on revenues of $7.95 billion. Fourth-quarter results also compare to the consensus estimates for EPS of $2.10 and $8.12 billion in revenues.
For the full year, 3M reported adjusted EPS of $9.10 and revenues of $32.14 billion, compared to prior-year EPS of $10.46 and sales of $32.77 billion. Analysts were looking for EPS of $9.05 and revenues of $32.14 billion.
On a GAAP basis, quarterly EPS came in at $1.66 which included a pretax restructuring charge of $134 million ($0.20 per share) and a pretax litigation charge of $214 million ($0.29 per share).
In a separate announcement, 3M said it is reorganizing its reporting structure to have all international employees reporting into one of the company’s four business groups, eliminating its previous international operations organization. The result is expected to cut 1,500 positions, “spanning all business groups, functions, and geographies.” The fourth-quarter restructuring charge covers these changes. 3M expects to realize annual pretax savings of $110 to $120 million, with $40 to $50 million in 2020.
Total sales increased by 25.4% in 3M’s health care segment, were flat in consumer and declined by 4.8% in the safety and industrial segment and by 6.2% in the transportation and electronics segment.
Operating cash flow in the quarter totaled $2.34 billion, while the annual total came in at $7.07 billion.
For the 2020 fiscal year, 3M guided EPS in a range of $9.30 to $9.75 a share and what it calls free cash flow conversion of 95% to 100%. Cash flow is forecast in a range of $6.9 billion to $7.6 billion, and free cash flow is expected to total $5.1 billion to $6.0 billion. The company defines free cash flow conversion as free cash flow divided by net income attributable to 3M. In 2019, free cash flow conversion totaled 118%, up from 91% in 2018.
Analysts had forecast first-quarter EPS at $2.21 on revenues of $8.25 billion and full-year 2020 EPS at $9.61 on revenues of $33.65 billion.
Investor reaction has not been positive, even though premarket trading has rebounded a little from a few sour days. 3M’s results, including its staff reductions, just aren’t enough to send investors’ spirits into second gear. The cash flow forecast is also a downer.
The stock traded down about 2.1% in Tuesday’s premarket to $172.00, after closing at $175.63 on Monday. The 52-week range is $150.58 to $219.75 and the consensus 12-month price target is $172.94.
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