3M Co. (MMM) beat analysts' expectations on the top line and met them on the bottom line for the first quarter, reporting earnings Tuesday, April 24, of $2.50 per share on revenue of $8.3 billion, but the news was not taken well by investors.
As a result of earnings, 3M shares closed down almost 7% Tuesday. The selloff largely comes thanks to 3M's decision to lower its guidance on both its full-year organic growth rate and earnings. The company said it now expects to see organic growth between 3% and 4% and earnings between $10.20 and $10.55 per share for the year. That compares to earlier guidance of organic growth between 3% and 5% and earnings of $10.20 to $10.70 a share.
According to analysts surveyed by FactSet Research Systems Inc., the St. Paul, Minn., conglomerate was expected to report first-quarter earnings of $2.50 per share on $8.2 billion in revenue.
3M's first-quarter results compare well with the first quarter of 2017, when it earned $2.16 per share on revenue of less than $7.7 billion. Analysts anticipated the company would earn $10.53 per share on $33.7 billion in revenue in 2018, compared with the $9.17 per share it earned on $31.7 billion in 2017.
The maker of products ranging from surgical tape to power tools such as sanders said Tuesday it is coming off a strong 2017 and has opened up this year with broad-based organic growth of 3%, with positive growth across all of its business groups.
"We also continued to invest in our commercialization capabilities, while returning significant cash to our shareholders -- including a 16 percent dividend increase," 3M chairman and CEO Inge G. Thulin said in the company's release. "Going forward we will continue to execute the 3M playbook and leverage the world-class capabilities of our people and our enterprise, and I am confident we will deliver strong results in 2018."
3M is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
The team suggested Tuesday that management deliberately lowered guidance ahead of the soft first quarter, but in doing so, the company has set itself up to over-deliver for the rest of the year. Therefore, AAP analysts feel the market selloff playing out Tuesday may be unjustified.
"While we are disappointed with the results, they do not come as a surprise as current COO/incoming CEO Mike Roman previously indicated that he expected first-quarter organic growth to come in at the lower end of the company's 3%-5% target range due to a timing issue in March and a slow start in its own Automotive OEM and aftermarket business ... ," the AAP team wrote Tuesday. "We have generally refrained from buying the stock since we learned about the soft first quarter, and now that we have received the disappointing results, we think the worst is out of the way and shares have become oversold, especially at this 2.7% yield.
"If we were not restricted, we would be buyers of 3M today because we think the company's next three quarters will be a strong improvement from this result."
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-This story has been updated to include comments from the TheStreet's Action Alerts Plus team.