3M Company MMM is grappling with softness in disposable respirator demand, raw material and logistics cost inflation and foreign-currency headwinds. Due to these headwinds shares of the company have lost 7.3% in the past six months compared with the industry’s increase of 7.3%.
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Softness in disposable respirator demand is weighing on 3M’s personal safety business within the Safety and Industrial segment. In the third quarter, lower disposable respirator demand hurt organic sales by $130 million. For the fourth quarter, the company expects $2 of $10 million-headwind from lower disposable respirator demand.
Weakness in the Transportation & Electronics unit due to a decline in consumer electronics demand, particularly for smartphones, tablets and TVs, is also likely to have weighed on 3M’s shares. The softness in consumer electronics demand can be linked to continued inflationary pressure, impact spending. Semiconductor supply-chain constraints are also weighing on the unit’s performance.
Reduced consumer spending is also hurting the Healthcare and Consumer segments performances. Within the Healthcare unit, the oral care business is experiencing softness.
Raw material and logistics cost inflation are affecting 3M’s bottom-line performance. Cost woes impacted the company’s earnings by 31 cents per share in the third quarter. For the fourth quarter, the company expects a headwind of approximately $100-$150 million raw ter from high and logistics costs.
Foreign-currency headwinds are hurting 3M’s top line. The strengthening of US dollar hurt the company’s sales by 5% in the third quarter. Due to this headwind and uncertainty surrounding the economy, the company has reduced its full-year forecast. total sales to decline 3-3.5% year over year in 2022 compared with the prior prediction of a decrease of 0.5-2.5%.
For 2022, MMM expects organic sales growth of 1.5-2% compared with 1.5-3.5% expected earlier. Foreign currency translation is expected to impact sales by 4.5% in 2022 compared with 4% anticipated earlier. Divestitures are expected to hurt sales % now (previously- no impact was estimated). 3M expects adjusted earnings of $10.10-$10.35 for 2022 compared with $10.30-$10.80 estimated earlier.
Zacks Rank & Key Picks
3M presently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering are as follows:
MRC Global Inc.. MRC presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of approximately 103%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
MRC Global has an estimated earnings growth rate of 325.9% and 37.4% for 2022 and 2023, respectively. Shares of the company have rallied 19.9% in the past six months.
IDEX Corporation IEX presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 5.7%, on average.
IDEX has an estimated earnings growth rate of 28.4% and 6.1% for 2022 and 2023, respectively. Shares of IEX have gained 27.1% in the past six months.
EnerSys ENS delivered a trailing four-quarter earnings surprise of 27.1%, on average. ENS currently carries a Zacks Rank of 2.
EnerSys has an estimated earnings growth rate of 7.2% and 26.3% for fiscal 2023 and 2024, respectively. The stock increased 27.1% in the past six months.
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