What's In The Offing For 3M Company (MMM) In Q1 Earnings?

3M Company (NYSE:MMM) is scheduled to report first-quarter 2018 results on Apr 24, before the opening bell.

The company has a decent earnings history, surpassing estimates thrice in the trailing four quarters, with an average positive surprise of 3.2%. Last quarter, the company reported earnings of $2.10, delivering a beat of 3.5%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

3M enjoys diversified product portfolio. However, the company’s growth initiatives are largely dependent on timing and market acceptances of its product offerings that include 3M’s ability to frequently renew its pipeline of new offerings and bring those to market at acceptable price points. Also, the company has to manage commodity price risks through negotiated supply contracts, price protection agreements and forward physical contracts.

Moreover, the company’s global presence makes it susceptible to tremendous local competitive pressure, particularly in Brazil, China, India and Indonesia. In order to survive the stiff competitive environment, 3M has to locally develop, manufacture, hire and purchase. These, in turn, are likely to reduce its profitability to some extent due to continuous investments in value drivers that act as a hedge against stiff competition.

Given 3M’s international presence, adverse foreign currency translations might affect its net investment in foreign subsidiaries and cause instability in cash flows related to foreign denominated transactions moving ahead. These undermine the company’s long-term growth potential to some extent. Additionally, 3M is facing increased pension expenses of late. The related extra costs are likely to be a drag on the company’s bottom line in the impending quarter as well.

However, the Zacks Consensus Estimate for first-quarter revenues from the Industrial segment (which constitutes a major portion of 3M’s total revenues) remains high at $2,883 million, reflecting growth of 6.4% year over year. Also, the company’s portfolio restructuring efforts by divesting assets bode well for its growth.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for 3M this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: 3M has an Earnings ESP of +0.27%. This is because the Most Accurate estimate of $2.51 is pegged higher than the Zacks Consensus Estimate of $2.50. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: 3M has a Zacks Rank #4 (Sell), which makes surprise prediction difficult.

As it is we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Crane Company (NYSE:CR) has an Earnings ESP of +1.32% and a Zacks Rank #2.

Danaher Corporation (NYSE:DHR) has an Earnings ESP of +1.45% and a Zacks Rank of 2.

IDEX Corporation (NYSE:IEX) has an Earnings ESP of +0.41% and a Zacks Rank #2.

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