On Tuesday, July 25, 3M (NYSE: MMM) will release its Q2 2023 financial results. According to our projections, the company’s revenues will total $7.9 billion, which is in line with the consensus figure. This would represent a drop of nearly 9% from the previous year. On an adjusted basis, earnings are expected to total around $1.73 per share, which is in line with the consensus forecast of $1.72 and 30% less than the prior-year quarter’s $2.48 figure.
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For more information on how the company’s revenues and earnings will probably trend during the quarter, see our interactive dashboard study on 3M’s Earnings Preview. What are some of the trends that could influence 3M’s performance?
Lower demand for respirators will undoubtedly have a negative impact on the company’s top line, even though it will presumably continue to profit from pricing changes. Looking at Q1 2023, 3M’s revenues were down 9% year over year across all business segments. Additionally, because of higher input prices, the operating margin declined by about 300 basis points on a reported basis and by about 400 basis points on an adjusted basis, to 17.9%.
For more information, see the 3M Operating Income Comparison screen. Earnings at 3M fell by 25% to $1.97 per share on an adjusted basis due to lower revenues and a reduction in operating margin. In order to improve its margin profile, 3M announced a restructuring plan early this year. As a result, it will take a charge in Q2 of between $175 and $250 million.
We think that 3M’s stock price still has the opportunity to increase. We believe 3M is worth $118 per share, or nearly 15% more than its current price of $103 per share. Our prediction is based on the assumption that MMM will earn $8.64 per share, adjusted, for the entire year 2023 at a 14x P/E multiple.
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For the entire year 2023, the business has projected that adjusted EPS will be in the $8.50 to $9.00 area. Comparing the 14x P/E multiple to the previous three years’ average, which was around 16x.
Due to the uncertainty surrounding ongoing litigation, we have assigned a somewhat lower P/E multiple for 3M than its historical average. In order to resolve the “forever chemicals” lawsuit, 3M agreed to pay $10.5 billion to $12.5 billion last month. [1] Defective earplugs are the subject of 3M’s other significant ongoing legal battle.
Despite the fact that 3M stock appears to have the opportunity for expansion, see how 3M Peers perform on important criteria. At Peer Comparisons, you can uncover additional insightful comparisons for businesses in other industries.
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