Q3 Earnings Preview for 3M (NYSE:MMM)

in EARNINGS/INVESTING IDEAS by

3M Company (NYSE:MMM) is scheduled to report Q3 earnings results on October 27, 2020.

The company is expected to report earnings of $2.27/share on revenue of $8.38 billion. The consensus earnings per share (EPS) of $2.27/share is based on a poll of 17 analysts and represents a decline in eps of −12.1% over the same quarter last year, when the company reported earnings of $2.58/share.

The revenue forecast of $8.38 billion based on a poll of 11 analysts implies a year-over-year (YoY) growth in revenue of 4.9%. Last year the company reported $7.991 billion in revenue for the quarter.

Expected to report EPS contraction of −12.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $8,380.39 $7,991.00 4.9%
EPS $2.27 $2.58 −12.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, and missed expectations 4 quarters.

What are your expectations from 3M Company for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.80 $1.78 −1.1% Missed
Q1, 2020 $2.01 $2.16 7.3% Beat
Q4, 2019 $2.10 $1.95 −7.2% Missed
Q3, 2019 $2.50 $2.58 3.3% Beat
Q2, 2019 $2.07 $2.13 2.8% Beat
Q1, 2019 $2.50 $2.23 −10.8% Missed
Q4, 2018 $2.28 $2.31 1.5% Beat
Q3, 2018 $2.70 $2.58 −4.5% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −4.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $163.24 $156.25 −4.3% Decline
April 28, 2020 $153.65 $156.26 1.7% Increase
January 28, 2020 $175.63 $162 −7.8% Decline
October 24, 2019 $168.76 $166.09 −1.6% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.84, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.84 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

3M Company is currently trading at $170.95/share, up 0.8% for the day. The company is trading at approximately 93.6% of its 52-week high of $182.54/share. The company’s stock price is up 9.4% since the last earnings report and up 1.5% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 59.44 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:MMM Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 19.18 and a forward P/E multiple of 20.14.

3M Company’s current share price also implies a price-to-book (P/B) multiple of 9.07. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $170.95
P/E Ratio 19.2x
P/E Ratio (Fwd) 20.1x
PEG Ratio 3.1
Total Debt / Total Capital 18.1%
Levered Free Cash Flow $5.88 billion
EV / EBITDA 13.7x

Finbox

3M Company is a large-cap stock with a market capitalization of $98.471 billion and a total enterprise value of $115.7 billion. The company operates in the Industrials sector and the Industrial Conglomerates industry.

3M Company develops, manufactures, and markets various products worldwide. It operates through four business segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. The Safety and Industrial segment offers personal safety products, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules to industrial, electrical, and safety markets. The Transportation and Electronics provides electronics, such as display materials and systems, electronic materials solutions; automotive and aerospace, and commercial solutions; advanced materials; and transportation safety products to transportation and electronic original equipment manufacturer customers. The Health Care segment offers medical and surgical supplies, skin health and infection prevention products, oral care, separation and purification sciences, health information systems, drug delivery systems, and food safety products to healthcare industry. The Consumer segment provides home improvement, home care, and consumer health care products, as well as stationery and office supplies to various consumers. This segment is also involved in the retail auto care business. It offers its products through various e-commerce and traditional wholesalers, retailers, jobbers, distributors, and dealers, as well as directly to users. 3M Company has a strategic collaboration with Merry Maids in residential cleaning sector. The company was founded in 1902 and is headquartered in St. Paul, Minnesota.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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