Why 3M Shares Are Surging Today

3M Co MMM reported second-quarter FY23 adjusted net sales of $7.99 billion, a decline of 4.7% year-over-year, beating the consensus of $7.87 billion.

Net sales totaled $8.3 billion, down 4.3% Y/Y, with an organic sales decline of 2.2%.

Adjusted EPS was $2.17, down 11.4% Y/Y, above the consensus of $1.72.

Gross margin expanded by 320 bps to 44.7%, with a gross profit of $3.72 billion (+3% Y/Y). The adjusted operating income margin was 19.3%, compared to 21.6% in 2Q22.

MMM reported Q2 operating cash flow of $1.5 billion, up 34% Y/Y; adjusted free cash flow of $1.5 billion (+44% Y/Y).

Adjusted free cash flow conversion year-to-date was 122% compared to 72% a year ago.

Adjusted EBITDA was $1.96 billion (-12.9% Y/Y), and the margin was 24.5%, contracted from 26.9% in 2Q22.

“In the second quarter, the actions we took to strengthen our supply chain and restructure the company led to improved service for customers, reduced costs across 3M, and better than expected margins and cash flow. As we execute our strategy, we are positioning 3M for long-term performance, including progressing the planned spin of our Health Care business and addressing a significant portion of PFAS litigation," commented 3M chairman and CEO Mike Roman.

3Q23 Outlook: MMM sees adjusted sales of ~$8 billion; and Adjusted EPS of $2.25-$2.40 versus consensus of $2.22.

FY23 Outlook: 3M sees adjusted total sales growth -5% to -1%, reflecting adjusted organic sales growth of -3% to flat, which remains unchanged.

Adjusted EPS of $8.60-$9.10 (prior $8.50-$9.00).

The company sees an adjusted operating cash flow of $5.9 billion-$6.3 billion.

Price Action: MMM shares are trading higher by 5.00% at $109.48 on the last check Tuesday.