MW Why 3M's stock turned red despite an earnings beat and raised outlook

By Tomi Kilgore

Economy remains sluggish, consumer remains subdued and demand for consumer electronics should weaken, 3M said, while lower tariff cost estimates helped lift the profit forecast

Shares of 3M Co. reversed lower Friday, after the maker of Post-it Notes, Scotch tape and Command strips beat quarterly earnings expectations and raised its full-year profit outlook, but provided a somewhat downbeat outlook on the economy and consumer sentiment.

The stock $(MMM.AU)$ had initially rallied toward a four-year high after the earnings were released, but it started pulling a U-turn after the post-earnings conference call with analysts had kicked off.

The macroeconomic trends 3M highlighted reflect "a global economy that remains sluggish and moving laterally, not materially improving or worsening," said Chief Executive Bill Brown, according to an AlphaSense transcript.

Brown added that the company's consumer electronics business is likely to soften in the second half of the year, "due to slower demand for premium devices." And the auto parts business will remain "challenged," and consumers will likely remain "subdued" through the rest of the year.

The stock climbed as much as 4.2% in the premarket, and was up 3.2% as the opening bell rang at a four-year high of $164.15, but then reversed lower. It was shedding 4.6% in recent midday trading, enough to pace the Dow Jones Industrial Average's DJIA decliners.

The stock had initially rallied, because 3M raised its guidance range for 2025 adjusted earnings per share, which excludes nonrecurring items, to $7.75 to $8 from $7.60 to $7.90. That comes after the estimated net negative impact from tariffs on EPS was reduced to 10 cents from 20 cents to 40 cents.

"With execution improving and solid results in the first half, we have confidence in our increased full-year EPS guidance, which now embeds the expected impact of tariffs," said Chief Executive William Brown.

And second-quarter results were also good. While net income fell 36.9% to $723 million, adjusted earnings per share, which excludes litigation costs, rose to $2.16 from $1.93 in the same period a year ago, and beat the FactSet EPS consensus of $2.01.

Net sales grew 1.4% to $6.34 billion, the fastest growth in nearly four years, while adjusted sales rose 2.3% to $6.2 billion to top the FactSet consensus of $6.12 billion.

Among 3M's business segments, safety and industrial sales rose 2.6% to $2.86 billion, transportation and electronics sales increased 1% to $1.94 billion and consumer sales edged up 0.3% to $1.27 billion.

Profitability on sales improved, as adjusted operating margins increased by 2.9 percentage points to 24.5%.

"We're tightening pricing controls by reducing price deviations and focusing on bigger deals with strategic customers," Brown said. "And we're reducing customer churn by leveraging our predictive analytics model to identify and win back customers at risk."

The stock, which had closed Thursday at its highest price since Sept. 3, 2021, has rallied 17.6% in 2025, while the Dow has gained 4.1%.

-Tomi Kilgore

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July 18, 2025 12:48 ET (16:48 GMT)

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