3M expects slow first-quarter growth, aims for long-term improvement

3M’s CEO, Bill Brown, recently shared updates at the JPMorgan Industrial Conference that mixed good and bad news for investors. While the long-term outlook seems positive, short-term results may not meet expectations. For the first quarter, 3M expects organic revenue growth between 1% to 1.5%, lower than the previous estimate of 2.1%. Despite this, Brown assured that earnings per share might slightly exceed prior projections, thanks to "tight control of spending." However, this focus on controlling costs amid weak sales raises concerns for the near future. Although earnings may improve, there are limits to how much spending can be cut without harming the business. It's uncertain if the drop in sales is temporary or part of a larger trend. Sales have been affected by various factors. Although orders are expected to rise over 2%, revenue is lagging behind. CFO Anurag Maheshwari explained that revenue is "getting elongated from the orders," meaning it will be lighter now but may improve later. Areas like manufacturing abrasives, the auto sector, and consumer products have shown notable weakness. 3M projects only 2% to 3% organic revenue growth for the entire year. Nonetheless, the company is viewed as a potential turnaround story. Brown is focusing on new product introductions and operational improvements, hoping to boost efficiency and margins over time. Good news includes a significant increase in new product introductions predicted for 2025. Brown noted a strong start to the year, with new products up by 40% to 50%. He seeks to improve production efficiency, which is currently low. Despite recent stock price increases, concerns remain about softening sales and ongoing litigation risks over past chemical use. However, 3M is on the path to operational improvements, making it a stock to consider buying, especially if it drops in price during market shifts.