3M ( MMM) slid 7% Friday after the manufacturer warned that second-quarter earnings will miss previous forecasts.

Before items, 3M expects to earn $1.04 to $1.09 a share on sales of $5.7 billion in the quarter. Analysts surveyed by Thomson First Call were forecasting earnings of $1.17 a share on sales of $5.71 billion in the quarter. The miss sent the stock down $5.96, or 7.3%, to $75.43.

"This second-quarter performance was impacted in large part by lower-than-expected sales volumes and higher-than-anticipated new capacity start-up costs in its optical systems division, a part of 3M's display and graphics business segment," the company said.

"As other companies in the LCD industry have recently noted, the industry has experienced an increase in inventory levels over the last few months, particularly in desktop monitors, which has significantly impacted sales of 3M optical films," the company said. "Coincident with this, it appears the industry overestimated demand for LCD televisions in anticipation of the FIFA World Cup and has temporarily reduced production accordingly, also impacting sales of our optical films.

"Finally, as demand for LCD TV accelerates, we expect LCD film sales will increasingly follow more seasonal patterns, with revenues being lowest in the second quarter and higher in the third and fourth quarters in anticipation of the holiday season," 3M said.

The earnings warning was badly timed for J.P. Morgan, which earlier Friday argued the shares are relatively cheap, particularly for this late stage of a strong economic cycle. The brokerage upgraded the stock to overweight from neutral.

"A high-quality portfolio that shows relatively less cyclicality with a pristine financial position makes 3M an excellent 'late, late' cycle stock," J.P. Morgan wrote. "3M exhibited significant outperformance through the turbulence of the last recession."

3M's shares are currently fetching about 17 times estimated earnings when it has normally gotten more than 21 times, the brokerage calculates. J.P. Morgan also pronounced management's earnings targets aggressive but reasonable and said 3M's international exposure is positive for growth and margins.

As for the shares, J.P. Morgan noted that they've been weak performers through the recovery, falling about 10% since the Federal Reserve began tightening rates in mid-2004.

"While earnings have shown consistent, respectable growth of about 19% in 2004 and 2005, the multiple has contracted 26%, or 6 points, from its early cycle average of about 24 times," the brokerage wrote. J.P. Morgan ascribed the underperformance to below-average growth, weakness in healthcare, and management uncertainty.

"Two of the three problems here are in the past, while we think the view on earnings growth is likely to change over the next 12-18 months (either the value of consistency, or upside to expectations)," the analyst wrote.