3M Shares Fall Despite 3Q Beat; Street Says Hold

Shares of 3M (MMM) declined 3.1% on Tuesday despite the industrial conglomerate exceeding analysts’ third-quarter estimates. The company has been seeing unprecedented demand for its N95 masks amid the pandemic and is on track to produce 2 billion masks this year.

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3M posted adjusted EPS of $2.43 in 3Q which came ahead of analysts’ forecast of $2.26. However, investors were disappointed as the adjusted EPS fell 5.8% Y/Y despite strong sales. Covid-related costs and a higher adjusted tax rate impacted 3Q earnings.

The company’s 3Q sales grew 4.5% to $8.35 billion as demand continued to be strong in personal safety, home improvement, general cleaning, semiconductor, data center and biopharma filtration categories. 3M exceeded the Street’s sales estimate of $8.32 billion. Its Health Care division generated sales of $2.2 billion, reflecting an impressive growth of 25.5%.

Meanwhile, the Safety and Industrial segment’s sales were up 6.9% to $3 billion and sales of the Consumer segment grew 5.6% to $1.4 billion. However, sales of the Transportation and Electronics segment fell 7.4% to $2.3 billion as the COVID-19 pandemic had an adverse impact on the segment’s auto business and end-markets like hospitality, oil and gas, advertising and highway infrastructure.

3M did not provide any guidance for 4Q or full-year as uncertainty continues to prevail amid COVID-19. However, the company said that it expects October sales to be flat to up low-single digits Y/Y. (See MMM stock analysis on TipRanks)

Last month, Credit Suisse analyst John Walsh increased his price target for 3M to $197 from $179 and reiterated a Buy rating. The analyst stated that in August, 3M saw continued stabilization in its monthly organic sales growth rate and he expects this momentum to continue into 2021 driven by China, automotive production, and semiconductor/consumer electronics.

Meanwhile, the Street has a Hold consensus for 3M with 1 Buy, 7 Holds and 2 Sells. With shares down 8.7% year-to-date, the average analyst price target of $170.20 reflects an upside potential of 5.7% in the coming months.