Before the opening bell on Tuesday, shares of industrial giant 3M Co. MMM fell after reporting lower-than-expected fourth-quarter 2019 sales and providing a disappointing profit outlook for 2020.
The St. Paul, Minnesota-based company, which manufactures everything from adhesive tape and Post-it Notes to air filters, posted adjusted earnings of $2.15 per share for the quarter, topping Refinitiv’s estimates of $2.10. Revenue grew 2.1% from the prior-year quarter to $8.11 billion, but missed expectations of $8.12 billion by a hair.
For the full year, 3M recorded adjusted earnings of $9.10 per share on $32.1 billion in revenue, which declined 1.9% from 2018.
Weighed down by the trade war and sluggish demand in China, the company noted sales in the Asia-Pacific region declined for the fifth straight quarter. Revenue fell 1.7% in the region, while sales in Europe, the Middle East and Africa decreased 2%. In contrast, sales in the U.S. climbed 7.4% and grew 1.2% in Latin America and Canada.
By segment, the safety and industrial and transportation and electronics businesses saw sales declines of 4.8% and 6.2% for the quarter, while the health care division recorded 25.4% revenue growth and the consumer segment’s sales were flat.
In a statement, Chairman and CEO Mike Roman said 3M’s results were in line with its own forecasts.
“While we continued to manage challenges in certain key end markets, we generated solid underlying margins and robust free cash flow,” he added.
Looking ahead to fiscal 2020, 3M said it anticipates earnings to be between $9.30 and $9.75 per share. The midpoint of that range is below analysts’ projections of $9.61 per share.
Roman also announced the company is taking the next step in its “transformation journey,” which includes a new global operating model and streamlining its organizational structure.
“As a result of our actions, we are well positioned to improve our performance, return to growth and deliver a successful 2020,” Roman said.
In a separate announcement, 3M said it will also be eliminating 1,500 jobs around the world as part of this restructuring initiative.
With a market cap of $96.42 billion, shares of 3M were down 4.52% at $167.70 on Tuesday morning. Having declined nearly 10% in 2019, GuruFocus estimates the stock has fallen another 0.5% year to date.
According to GuruFocus’ Industry Overview page, 3M is the third-largest producer of industrial products in the U.S., behind Honeywell International Inc. HON and General Electric Co. GE.
Of the gurus invested in the company, First Eagle Investment (Trades, Portfolio), Mairs and Power (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) have the largest stakes with 0.82%, 0.33% and 0.30% of outstanding shares.
Disclosure: No positions.
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