3M Company MMM is scheduled to release first-quarter 2025 results on April 22, before market open. The Zacks Consensus Estimate for earnings is currently pegged at $1.77 per share on revenues of $5.80 billion. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

First-quarter earnings estimates have been revised upward by a penny over the past seven days. However, the bottom-line projection indicates a decrease of 25.9% from the year-ago number. The Zacks Consensus Estimate for quarterly revenues indicates a year-over-year decline of 27.6%.

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It is worth noting that in April 2024, 3M completed the spin-off of its Health Care business into a separate public company. Notably, the spin-off is likely to have weighed on MMM’s year-over-year top-line comparison in the quarter.

Earnings Surprise History

3M has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.7%. In the last reported quarter, it delivered an earnings surprise of 1.2%.

Earnings Whispers for MMM

Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.

MMM has an Earnings ESP of -0.85% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

What’s Likely to Shape 3M’s Q1 Results?

3M has been witnessing solid momentum in the Safety and Industrial segment, driven by strength in roofing granules and electrical markets. Solid orders for aluminum high-capacity conductors and power cable accessories in Asia and the United States, supported by higher demand from data centers, are likely to have augmented the segment’s performance in the first quarter. However, soft demand in abrasives and industrial specialties markets is likely to have been a spoilsport. We expect the segment’s revenues to inch up 0.3% from the year-ago quarter to $2.74 billion.

Solid electronics demand, backed by an increase in production volume by electronics original equipment manufacturer (OEM) customers, is likely to support the Transportation and Electronics segment’s results. However, prolonged weakness in the automotive electrification market, due to a decline in automotive OEM build rates, is likely to have dragged its top line. We expect the segment’s revenues to decline 12.9% from the year-ago quarter to $1.83 billion.

Weakness in the consumer retail end markets, owing to lower consumer retail discretionary spending on hardline goods, is expected to have hurt the Consumer segment’s performance in the first quarter. There has been particular weakness in the packaging & expression, home & auto care and consumer safety and well-being businesses. The Zacks Consensus Estimate for first-quarter revenues from the Consumer segment is expected to be flat year over year at $1.15 billion.

The company has been undertaking structural reorganization actions that include streamlining geographic footprint, simplifying the supply chain and optimizing manufacturing operations. These actions are expected to have reduced its operational costs and improved margins in the to-be-reported quarter.

3M’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar requires the company to either raise prices or contract profit margins in locations outside the United States. For instance, adverse foreign currency translation lowered its sales by 0.8% year over year in the fourth quarter of 2024.

Price Performance & Valuation

MMM shares have lost 7.5% in the past three months, lower than the Zacks Diversified Operations industry’s 9.9% decline. The conglomerate giant’s shares have also fared comparatively better than the S&P 500’s decline of 10.5%. The company’s peers, Honeywell International Inc. HON, Federal Signal Corporation FSS and Griffon Corporation GFF have lost 13.2%, 22.9% and 10.9%, respectively, in the same period.

MMM’s Three-Month Price Performance

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In terms of valuation, MMM’s forward 12-month price-to-earnings (P/E) is 16.47X, a premium to its five-year median of 16.00X and industry average of 15.19X. This indicates that investors will be paying a higher price than the company's expected earnings growth compared with the industry as a whole. In comparison, Honeywell, Federal Signal and Griffon are trading at 18.33X, 19.17X and 10.75X, respectively.

Price-to-Earnings (Forward 12 Months)

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How Should You Play 3M Pre-Q1 Earnings?

3M's robust and diversified portfolio, along with its structural reorganization actions and strength in the Safety and Industrial segment, seems promising for its long-term growth.

However, weakness in the Transportation and Electronics segment, along with sluggish demand in the consumer retail end markets, has been concerning for its near-term performance. Also, an expensive valuation warrants a cautious approach for existing investors.

Potential investors should monitor the developments of the stock closely for a more appropriate entry point. Therefore, it might be prudent to wait for MMM’s earnings report before making an investment decision.

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This article originally published on Zacks Investment Research (zacks.com).

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