Are 3M Sales Really Improving?

When 3M Co. (NYSE: MMM) released its second-quarter financial results before the markets opened on Tuesday, the company said that it had $1.78 in earnings per share (EPS) and $7.2 billion in revenue. That compared with consensus estimates of $1.80 in EPS and $7.32 billion in revenue, as well as the $2.13 per share and $8.17 billion posted in the same period of last year.

During the second quarter, end-market demand remained strong in personal safety, home improvement, general cleaning, semiconductor, data center and biopharma filtration. However, second-quarter sales declined 12.2% year over year.

Organic local-currency sales declined 13.1%, while acquisitions, net of divestitures, increased sales by 2.4%. Foreign currency translation reduced sales by 1.5% year over year.

Total sales declined 0.4% in Health Care and 6.2% in Consumer, with declines of 20.9% in Transportation and Electronics and 9.2% in Safety and Industrial. Organic local-currency sales decreased 5.0% in Consumer, 6.1% in Safety and Industrial, 12.4% in Health Care, and 18.9% in Transportation and Electronics.

The company’s operating cash flow was $1.9 billion with adjusted free cash flow of $1.5 billion, contributing to adjusted free cash flow conversion of 149%. 3M paid $846 million in cash dividends to shareholders during the quarter and ended the quarter with $4.22 billion in cash and cash equivalents.

The company previously withdrew its full-year outlook due to the evolving and uncertain impact of the COVID-19 pandemic and it is standing by this. However, management did say that 3M is seeing broad-based sales improvements across businesses and geographies to start the third quarter. With one week left in July, total company sales are currently up low-single digits year-on-year.

Looking ahead, analysts are calling for $8.18 in EPS and $31.05 billion in revenue for the 2020 full year. The 2019 numbers were reportedly $9.08 in EPS and $32.14 billion in revenue.

For the third quarter, consensus estimates are calling for $2.14 in EPS and $7.63 billion in revenue. The same period last year had $2.58 in EPS and $7.99 billion in revenue.

3M stock closed Monday at $163.24, in a 52-week range of $114.04 to $182.55. The consensus price target is $158.80. Following the announcement, the stock was down about 3% at $158.70 in early trading indications Tuesday.