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Shares of 3M Co. rallied Tuesday, after the consumer, industrial and health care-products company swung to a large second-quarter loss on a litigation settlement, but reported adjusted profit that beat expectations by a wide margin and raised its full-year outlook.
“In the second quarter, the actions we took to strengthen our supply chain and restructure the company led to improved service for customers, reduced costs across 3M, and better than expected margins and cash flow,” said Chief Executive Mike Roman.
The stock
MMM,
climbed 2.3% in premarket trading, putting them on track to open at the highest price seen during regular session hours since May 1. Monday’s closing price of $104.27 was 11.7% above the 11-year closing low of $93.31 hit on May 31.
The company swung to a net loss of $6.84 billion, or $12.35 a share, from net income of $78 million, or 14 cents a share, in the year-ago period.
The loss was a result of a $10.3 billion charge booked during the quarter for a proposed settlement of claims it was responsible for per- and polyfluoroalkyl substances (PFAS), or “forever chemicals,” in drinking water.
Excluding nonrecurring items, adjusted earnings per share fell to $2.17 from $2.45, but was well above the FactSet consensus of $1.73.
Sales surprisingly grew 4.2%, to $8.325 billion from $7.993 billion, while the FactSet consensus was for a decline to $7.875 billion.
Among 3M’s business segments, safety and industrial sales fell 5.4% to $2.77 billion, just above the FactSet consensus of $2.76 billion, and transportation and electronics sales declined 3.4% to $2.19 billion but beat expectations of $1.79 billion.
Consumer sales were down 2.8% to $1.29 billion but topped the FactSet consensus of $1.26 billion, while sales in its health care business, which is slated to be spun off into a separate public company, fell 4.8% to $2.08 billion to fall shy of expectations of $2.09 billion.
Adjusted free cash flow improved 43.7% to $1.46 billion, compared with the average estimate of two analysts surveyed by FactSet of $909 million.
For 2023, the company raised its guidance range for adjusted EPS to $8.60 to $9.10 from $8.50 to $9.00.
“As we execute our strategy, we are positioning 3M for long-term performance, including progressing the planned spin of our health care business and addressing a significant portion of PFAS litigation,” CEO Roman said.
The stock has slipped 0.1% over the past three months through Monday, while the Dow Jones Industrial Average
DJIA,
has tacked on 5.6%.
