Shares in 3M Cos. (NYSE:MMM) took a double-digit hit today when the industrial conglomerate missed the consensus forecast for its first-quarter results, cut its outlook for the rest of the year and announced layoffs for some 2,000 of its employees.
St. Paul, Min.-based 3M posted profits of $891 million, or $1.51 per share, on sales of $7.86 billion for the three months ended March 31, marking a 48.0% bottom-line gain despite a -5.05 sales decline compared with Q1 2018.
But adjusted to exclude one-time items – including $548 million in pre-tax charges to cover its exposure in lawsuits brought over environmental contamination with per- and polyfluoroalkyl substances and coal mine dust litigation – earnings per share were $2.23, 26¢ below the expectation on Wall Street, where analysts were looking for sales of $8.02 billion.
“The first quarter was a disappointing start to the year for 3M,” CEO Mike Roman said in prepared remarks. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves. As a result, we have stepped up additional actions – including restructuring – to drive productivity, reduce costs, and increase cash flow as we manage through challenges in some of our end markets.
“While we take actions to manage through the near-term, we also continue to invest in growth to position 3M for the future,” Roman said. “We recently implemented a significant portfolio realignment from five to four business groups, which will enable us to better serve our customers and global markets. Moving forward, I am confident that we are making the necessary changes and focused on the right priorities to accelerate 3M into a stronger future.”
Regarding the layoffs, 3M said it’s looking to save $225 million to $250 million a year, including $100 million this year, by laying off about 2,000 workers worldwide. The move is expected to deliver a pre-tax hit of roughly $150 million, or 20¢ per share, this year, the company said.
3M also cut its outlook on 2019, saying it now expects to log adjusted EPS of $9.25 to $9.75, down from $10.45 to $10.90 previously, on constant-currency sales growth of -1% to 2% compared with prior guidance for 1% to 4%.
Healthcare profits slide on flat sales
3M Healthcare’s operating profits slid -5.7% to $432 million on sales growth of 0.3% to $1.54 billion during the quarter, with foreign exchange rates shaving -3.6% from the top-line, offset by 3.2% growth from acquisitions.
Sales grew for the division’s food safety, HIT, medical consumables and oral care businesses, but declined for its drug delivery unit, the company said.
MMM shares were off by -10.9% to $195.18 apiece today just before noon Eastern.