Al Root

3M earnings are due Tuesday morning. Investors want to see higher sales growth.

Growth would help the stock, but while investor sentiment remains bullish, investors shouldn't expect a repeat of the amazing second-quarter post-earnings jump.

For the third quarter, Wall Street projects earnings per share of about $1.90 from sales of $6.1 billion, according to FactSet.

In the second quarter, 3M reported adjusted earnings per share of $1.93 on sales of $6 billion A year ago, it reported EPS of $2.17 from sales of $8.8 billion, but that quarter included results of the healthcare division that was spun out as Solventum on April 1.

Comparable sales have been growing for two consecutive quarters, by about 1% year over year. Not much growth, but growth nonetheless. Before the first quarter of 2024, comparable sales hadn't shown year-over-year growth for more than a year.

For 2024, management expects comparable sales growth to come in between minus 0.25% and positive 1.75%. A guidance boost would be a welcome sign that the global economy is improving.

Options markets imply that 3M stock will move about 4% up or down following earnings. Shares have moved about 11% up or down following the past four quarterly reports. The whopping 23% jump following 3M's second-quarter earnings in July skews the average.

"3M stock has been on a tear higher this year, boosted by the biggest one-day gain in over 40 years, recorded on the back of the last earnings report," wrote Wolfe Research analyst Nigel Coe in a preview report. "Investor sentiment remains bullish, and angled for a beat and raise."

Failing to beat and raise could lead to some disappointment. Coming into Tuesday's trading, 3M shares were up about 47% year to date.

Along with typical financial numbers, investors want an update on organizational improvement. The second-quarter report was new CEO Bill Brown's first at the helm.

Management hosts a conference call at 9 a.m. Eastern time to discuss the quarter.

Shares dropped 0.5% in Monday trading, closing at $134.48 apiece, while the S&P 500 and Dow Jones Industrial Average were down 0.3% and 0.8%, respectively.

Write to Al Root at allen.root@dowjones.com

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October 21, 2024 16:30 ET (20:30 GMT)

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