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3M CO (MMM)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered a clean beat on EPS and revenue with margin expansion: adjusted EPS $1.88 (+10% YoY) vs S&P Global consensus $1.77*; GAAP sales $6.00B (-1.0% YoY) vs consensus $5.73B*; adjusted operating margin 23.5% (+220 bps YoY) .
  • Guidance maintained: FY25 adjusted EPS $7.60–$7.90; management quantified tariff sensitivity of $(0.20)–$(0.40) per share for 2025 and outlined mitigation levers (sourcing/logistics, selective pricing, cost actions) .
  • Operating execution improved: OTIF reached 89% (best in 5 years), OEE rose to 58%; order rates +>2% with backlog up low-teens exiting March, providing ~25% Q2 coverage .
  • Capital returns stepped up: dividend raised 4%; gross FY25 buybacks increased to ~$2.0B (from $1.5B) within a $7.5B authorization, offering a support to EPS despite macro/tariff headwinds .

What Went Well and What Went Wrong

What Went Well

  • Broad-based execution and margins: adjusted operating margin 23.5% (+220 bps YoY), driven by productivity and cost control while reinvesting for growth .
    • CEO: “We had a strong start… operating margins increased 220 basis points year-over-year… and free cash flow was solid at about $0.5 billion” .
  • Commercial/operational cadence improved: OTIF 89% (+3.5 pp YoY; +~1 pp QoQ), OEE 58% (+4 pp QoQ); 62 new product launches in Q1, on track for 215 in 2025 .
  • Safety & Industrial and Consumer margins improved; strong demand in electrical markets, industrial adhesives/tapes, aerospace, and consumer safety & well-being .

What Went Wrong

  • Transportation & Electronics (T&E) softness: segment sales -5.4% YoY; electronics below expectations on lower device demand; auto OEM down mid-single digits amid weaker builds, especially in U.S./Europe .
  • Europe remained a drag with continued macro weakness and high-single-digit auto decline; EMEA organic sales -5.1% in Q1 .
  • Tariffs pose a sizable headwind: annualized gross impact ~$850M; $400M ($0.60 EPS) in 2025 before offsets; net $(0.20)–$(0.40) EPS impact after mitigation; T&E margins down YoY given PFAS stranded costs and mix .

Financial Results

Headline metrics (chronological columns)

MetricQ1 2024Q4 2024Q1 2025
GAAP Net Sales ($B)6.02 6.01 5.95
Adjusted Sales ($B)5.74 5.81 5.78
GAAP Diluted EPS ($)1.27 1.33 2.04
Adjusted EPS ($)1.71 1.68 1.88
GAAP Operating Margin (%)19.1 18.1 20.9
Adjusted Operating Margin (%)21.3 19.7 23.5
Cash from Operations ($B)0.77 1.82 (Q4) (0.08)
Adjusted Free Cash Flow ($B)0.83 1.33 (Q4) 0.49

Q1 2025 vs S&P Global consensus

MetricConsensus*Actual
Adjusted EPS ($)1.77*1.88
Revenue ($B)5.73*5.95

Values retrieved from S&P Global.

Segment performance (YoY)

SegmentNet Sales Q1’24 ($M)Net Sales Q1’25 ($M)YoY %Op Inc Q1’24 ($M)Op Inc Q1’25 ($M)YoY %
Safety & Industrial2,732 2,745 +0.5 657 696 +5.9
Transportation & Electronics2,104 1,990 -5.4 481 352 -26.8
Consumer1,140 1,124 -1.4 216 219 +1.4

KPIs and mix

  • OTIF: 89% in Q1 2025 (+3.5 pp YoY; +~1 pp QoQ) .
  • OEE: 58% (+4 pp QoQ), deployed across 191 key assets (~50% of production volume) .
  • Organic sales by region: Americas +1.6% YoY; APAC -0.7%; EMEA -5.1% (reported) . Adjusted organic sales +1.5% YoY (company) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS ($)FY 2025$7.60–$7.90 (Jan 21, 2025) $7.60–$7.90 (Apr 22) Maintained
Adjusted Organic Sales GrowthFY 20252%–3% (Jan 21) 2%–3% (trending to lower end) Maintained; bias to low end
FX EPS HeadwindFY 2025~$0.20 headwind (prior) ~$0.15 headwind Improved
Tariff SensitivityFY 2025N/A$(0.20)–$(0.40) EPS (net) New disclosure
Gross Share RepurchasesFY 2025~$1.5B (prior plan) ~$2.0B; $7.5B authorized Raised
Adjusted FCF ConversionFY 2025~100% ~100% reiterated Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (prior-2)Q4 2024 (prior-1)Q1 2025 (current)Trend
Earnings power/marginsAdj OM 23.0%; raised FY24 adj EPS to $7.20–$7.30 Adj OM 19.7%; FY25 adj EPS $7.60–$7.90 set Adj OM 23.5%; FY25 EPS maintained Margin cadence improving; discipline continues
Legal/PFAS cashQ3: large litigation cash drove CFOA negative, adj FCF $1.5B FY24 CFOA $1.8B; adj FCF $4.9B Litigation payments ~$806M in Q1; adj FCF $0.49B Cash headwinds moderating vs 2024 peaks
Macro/regionsEMEA weak; Americas/APAC resilient EMEA still soft; S&I/T&E mixed EMEA soft; U.S. low-single-digit up; China mid-single-digit up Mixed; Europe lagging
Auto/electronicsT&E down modest YoY; electronics mixed T&E pressure persisted Auto OEM down MSD; electronics softer than expected Still a headwind
Tariffs/trade——Gross annualized impact ~$850M; net $(0.20)–$(0.40) EPS; mitigation detailed New headwind quantified
Commercial excellence/new products——62 launches Q1; on track for 215 in 2025; backlog up low-teens Improving cadence

Management Commentary

  • CEO Bill Brown: “We had a strong start to the year with adjusted earnings per share of $1.88… Operating margins increased 220 basis points year-over-year… free cash flow was solid at about $0.5 billion” .
  • On operations: “OTIF increased… to 89%, the best quarter we’ve had in the past 5 years… OEE… up 4 percentage points to 58%… covering about 50% of production volume” .
  • On capital deployment: “We refinanced $1.1B in debt, returned $1.7B to shareholders and raised our dividend by 4%… share repurchase authorization of $7.5B; we now expect repurchases to be about $2B” .
  • CFO Anurag Maheshwari on tariffs: “Current tariff rates… equate to approximately $675M of potential annualized impact after anticipated exemptions… plus ~$175M other tariffs… total ~$850M annualized before mitigation; expect half in 2025 ($400M; ~$0.60 EPS) before offsets; net $(0.20)–$(0.40) EPS after mitigation” .

Q&A Highlights

  • Minimal tariff-related prebuy pulled into Q1 (~$10M; mainly China) .
  • Mitigation levers: sourcing/logistics reconfiguration (free trade zones, point-to-point shipments, shifting value-add), discretionary cost actions, and selective surcharges/list price changes; potential offensive share gains given U.S. footprint .
  • Exposure skew: incremental China import exposure more weighted to Consumer; management not pausing orders; 90 days of inventory tempers early impact .
  • FX headwind revised: expected FY25 FX EPS headwind improved from ~$0.20 to ~$0.15 (based on late-March rates) .
  • EPS cadence: Q2’25 operational EPS +$0.15–$0.20 YoY; sequential EPS +$0.10–$0.15; H1 ≈ 50% of full-year growth, H2 mirrors H1 .

Estimates Context

  • Q1 2025 beat on both top and bottom lines: adjusted EPS $1.88 vs $1.77*; revenue $5.95B vs $5.73B* .
  • Street likely raises FY25 EPS at the margin for operational outperformance and buyback lift, but tariff headwinds and macro (auto/electronics, Europe) may cap upward revisions; management held EPS range and applied a ~$0.10 operating contingency .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with margin expansion and improving execution (OTIF/OEE), while sustaining reinvestment—constructive for multiple stability .
  • Guidance prudently unchanged amid macro/tariff uncertainty; tariff sensitivity quantified with a credible mitigation plan; watch second-half flow-through as 90-day inventory rolls off .
  • Mix remains a watch item: T&E under pressure (electronics, auto builds), while S&I and select Consumer categories show resilience; aerospace remains a bright spot .
  • Capital returns stepping up: gross FY25 buyback to ~$2B and 4% dividend increase provide downside support to EPS .
  • Estimate path: near-term 2025 EPS revisions likely modestly higher on Q1 delivery and buybacks, but tariff net $(0.20)–$(0.40) and macro (Europe/auto) temper upside .
  • Near-term trading lens: beats plus buyback vs tariff overhang—monitor pricing traction, sourcing shifts, and Q2/Q3 segment margins for confirmation of mitigation credibility .

Appendix – Additional Detail

  • Q1 2025 non-GAAP adjustments: +$0.41 net costs for significant litigation, +$0.06 manufactured PFAS products, and $(0.63) Solventum ownership change; net special item impact $(0.16) to EPS .
  • Geography sales change (reported): Americas +1.8%, APAC -2.6%, EMEA -6.7% .
  • Cash: CFOA $(79)M (seasonal, litigation cash), adjusted FCF $489M; returned $1.7B via dividends/buybacks in Q1 .

S&P Global estimates disclaimer: All cells/figures marked with an asterisk (*) are consensus values retrieved from S&P Global.