What To Expect From 3M’s Q1 2019 Results?

3M (NYSE: MMM), a diversified technology company with a global presence, is set to announce its Q1 2019 results on April 25, 2019 followed by a conference call with analysts. The market expects the company to report revenue close to $8 billion in Q1 2019, which would be an increase of less than 1% on a quarter on quarter basis. Market expectation is for the company to report earnings of $2.49 per share in Q1 2019, similar to the $2.50 per share in the year-ago period.

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven 3M’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more Industrials data.

Factors That May Impact Future Performance:

Pricing Growth: 

• 3M delivered strong pricing growth in all the four quarters of 2018. In Q1 2018, 3M delivered 70 basis points of pricing growth, in Q2 2018 it  increased to 110 basis points of pricing growth. The company delivered a 120 basis points increase in the third quarter of the previous year while they ended the 4^th quarter with a 30 basis point pricing growth, which also helped offset raw material inflation. In Q1 2019 we expect the pricing growth to continue.

Cost Headwinds:

• The raw material headwinds were more than offset by the price growth in 2018. The headwinds are primarily due to the tariffs and the higher than expected commodity prices and logistics expenses. The company declared an additional foreign currency (net of hedging) headwind of $0.03 per share earnings in the 4^th quarter of 2018. 3M expects foreign currency translation to be a 1% headwind to revenue but neutral to earnings for Fiscal Year 2019.

Acquisitions And Divestitures Aiding In The Progress:

• 3M is expected to continue to look at acquisitions in attractive areas, while undertaking divestitures in its underperforming units. In notable acquisitions, 3M purchased Scott Safety from Johnson Controls. In 2018 it  divested its Communication Markets Division to Corning Incorporated for $870 million. It has also sold its Identity Management business, its Tolling and Automated License/Number Plate Recognition business, and its Electronic Monitoring Business in its Transportation Safety division. In December 2018 the company acquired M*Modal’s technology business (a leading provider of AI-powered healthcare solutions).

China Performance:

• The company’s manufacturing and exports-related business, especially the automotive in its Industrials segment, had shown considerable weakness in 2018. In Q4 2018, organic growth in the China region was 1% led by healthcare and electronics. One factor expected to work in 3M’s favor after China’s tariff retaliation is that the company has focused on local manufacturing. Thus, the impact of the steel and aluminum tariffs is expected to be minimal – approximately $10 million, or a penny per share on an annualized basis.

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