Here's How You Should Play 3M Stock Ahead of Q1 Earnings

3M Company MMM is scheduled to release first-quarter 2024 results on Apr 30, before market open.
The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 18.5%. In the last reported quarter, its earnings of $2.42 per share surpassed the consensus estimate of $2.31 by 4.8%.

Transportation & Electronics Revenues to Aid Q1 Results

Solid momentum across the advanced materials business, commercial solutions business and strength across the auto original equipment manufacturer business, driven by increasing demand for global car and light truck bills, are likely to have augmented the Transportation and Electronics segment's revenues in the first quarter.
The acquisition of technology assets of LeanTec (April 2022), which strengthened the company's ability to deliver a more connected, digital bodyshop solution via its RepairStack Performance Solutions, is also expected to have supported the company's results in the soon-to-be-reported quarter.
3M is expected to have benefited from its restructuring actions, including headcount reduction, which are likely to have reduced costs and improved margins, in the first quarter. The company's operational execution, restructuring savings and spending discipline are likely to have positively impacted its results.

Not All Roses, Some Brickbats as Well

The decreasing demand for disposable respirators is expected to have hurt 3M's Safety and Industrial segment. The Consumer segment is expected to have put up a weak show in the upcoming earnings due to softness in home health, auto and stationery and office businesses. These setbacks are likely to have impacted the company's overall revenues in the to-be-reported quarter. The Zacks Consensus Estimate for the company's first-quarter 2024 revenues is pegged at $7.6 billion, suggesting a decline of 4.8% from the year-ago quarter's reported figure.
Higher raw material, logistics costs and energy cost inflation are likely to have dented MMM's bottom line in the to-be-reported quarter. Also, given 3M's extensive presence in international markets, foreign currency headwinds are expected to have affected its profitability in the soon-to-be-reported quarter.
Based on the trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), a commonly used multiple for valuing airline stocks, MMM is currently trading at 12.25X, above the 12.00X three-year median.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for MMM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below.
Earnings ESP: 3M has an Earnings ESP of -7.95% as the Most Accurate Estimate is pegged at $1.78 per share, which is lower than the Zacks Consensus Estimate of $1.93. You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Zacks Rank: 3M presently carries a Zacks Rank of 3.

Final Thoughts

Given the abovementioned points, we can safely conclude that investors should refrain from rushing to buy MMM, which is facing quite a few challenges. Instead, they should monitor the developments of the stock closely for a more appropriate entry point, as an erroneous and hasty decision could affect portfolio gains.

Stocks to Consider

Here are some companies, which according to our model, have the right combination of elements to beat on earnings in this reporting cycle.
Atmus Filtration Technologies Inc. ATMU has an Earnings ESP of +0.57% and a Zacks Rank of 1, at present.
The company is slated to release first-quarter results on May 3. ATMU delivered a trailing four-quarter earnings surprise of 20.3%, on average.
Chart Industries, Inc. GTLS has an Earnings ESP of +9.86% and a Zacks Rank of 2. The company is slated to release first-quarter 2024 results on May 3.
Chart Industries' earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters while missing the mark in one, the average beat being 75.9%.
Axon Enterprise, Inc. AXON has an Earnings ESP of +5.97% and a Zacks Rank of 3, at present.
The company is scheduled to release first-quarter 2024 results on May 6. Axon's earnings surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 58.7%.
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