Long-suffering 3M(NYSE: MMM) shareholders must have been pleasantly surprised by its first-quarter results Tuesday morning, and the stock is moving higher as a result. Shares of 3M were trading up by 5% as of 10:30 a.m. ET after its numbers easily beat expectations.
A return to organic growth
The industrial conglomerate has lost more than 40% of its value over the past three years as it worked through a series of restructurings, lawsuits, and operational issues that have impacted earnings.
The first quarter provided some reasons for hope that the worst is over. 3M earned $2.39 per share on sales of $7.72 billion, easily topping Wall Street's consensus estimates of $1.96 per share on $7.1 billion. Sales were down slightly year over year, including the impact of foreign currency fluctuations, and its GAAP (generally accepted accounting principles) operating income margin improved by more than 300 basis points to 18.8%.
"We delivered results that were better than our expectations as we returned to organic growth and achieved double digit adjusted earnings growth," CEO Mike Roman said in the earnings release.
The company has completed the spinoff of its healthcare businesses as Solventum and finalized legal settlements related to water contamination and its combat earplugs. 3M is also getting a leadership change: Bill Brown is slated to take over as CEO on May 1.
Is 3M a buy after its strong earnings report?
Management sees a continued stabilization for the business as the year goes on. Full-year revenue is expected to land in a range of down 0.25% to up 1.75%, and earnings per share (EPS) are expected to come in at between $6.80 and $7.30. The midpoint of that range suggests at least some upside to Wall Street's EPS consensus of $7.
3M has been weighed down by a lot of different factors in recent years, but increasingly, there are signs that the headwinds besetting it are beginning to ease. Don't expect it to make a rapid turnaround, but if you're intrigued by 3M's potential, this is a good time to consider buying in.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends 3M and Solventum. The Motley Fool has a disclosure policy.
