3M (MMM) fell 11.03% today, Tuesday, January 23, the most in nearly five years, after announcing projections for 2024 sales and earnings below Wall Street expectations.
Now granted that 3M is a special case–the company is engaged in a huge restructuring effort that has met with a high degree of investor skepticism. In short, investors doubt that the company can pull it off without cutting its dividend. So the stock is especially sensitive to any news that suggest that the restructuring is failing.
But the stock’s big drop today is also an indication of how worried this market, trading at record highs, is about the possibility that earnings growth for the fourth quarter, the subject of the current earnings season, won’t support prices at these levels.
It’s exactly what investors and traders fear for Apple, and Tesla,and other widely held stocks in the next couple of weeks.
My advice recently has been “Watch out for disappointing guidance” and 3M’s drop today certainly hasn’t led me to revise that warning.
“This is a bit concerning for the sector overall this quarter,” Melius Research analyst Scott Davis said in a note to clients. “Anyone guiding below consensus may get smacked.”
Exactly.
Today 3M said adjusted earnings will be no more than $9.75 per share this year, short of the $9.81 average of analyst estimates compiled by Bloomberg. Organic sales are expected to be flat to up 2%, 3M said, while analysts had predicted the figure would grow by 2.7%.
Adjusted earnings were $2.42 per share in the fourth quarter, better than the $2.31 analysts predicted. The company’s adjusted operating margin of 20.9% came in just shy of Wall Street’s expectation for 21.2%.
The company said the spinoff of its health-care unit is still on track to be completed in the first half of this year.
3M last year launched a sweeping restructuring push including thousands of job cuts as it confronted sluggish sales and huge legal liabilities. The company last year agreed to pay as much as $12.5 billion to resolve claims by drinking water utilities that so-called forever chemicals produced by 3M tainted water supplies across much of the United States. 3M also agreed to pay $6 billion to settle hundreds of thousands of lawsuits alleging it supplied defective earplugs to U.S. combat troops.
