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Shares of 3M Co. plunged into their largest single-day decline in more than 30 years, after the industrial, health care and consumer products company announced profits and unmet revenues, reduced its outlook for the year and announced the elimination of 2,000 jobs. .
Management admitted that what made the first quarter results even uglier was that the organization had not responded quickly enough to the weakness, particularly in its industrial operations in Asia and the United States.
The stock
MMM, -12.82%
12.8% decline in trading in the afternoon, with volume increasing to 11.6 million shares, compared to the daily average of approximately 1.9 million shares. This was by far the largest decline in the Dow Jones industrial average, with a price loss of $ 28.12, which resulted in a 191-point slowdown on the Dow Jones.
DJIA, -0.39%
which was down just 80 points. The decline also reduced the company's market capitalization by $ 16.2 billion.
The percentage decline was the second after the 26% fall of October 19, 1987. It is that day that we call Black Monday. The Dow recorded its biggest crash of one day with a fall of 22.6%.
The sale of the shares comes just two days after the closing of the shares, reaching a record of $ 219.50 over one year.
The company behind brands such as Post-it, Scotch, Nexcare and Command, released its results for the first quarter before opening on Thursday, posting a net profit of $ 891 million, or 1 percent. $ 51 per share versus $ 602 million or 98 cents per share. period a year ago. Excluding non-recurring items, such as litigation expenses and the impact of tax reform, Adjusted EPS slipped from $ 2.50 to $ 2.23, thereby missing consensus of $ 2.49 set by the FactSet.
Litigation expenses included the establishment of $ 235 million in reserves to address the environmental issues related to the manufacture and disposal of PFAS (perfluorinated compounds) and an increase of $ 313 million. $ reserves for breathing apparatus to resolve ongoing and future coal mine litigation. .
Excluding these expenses, operating margins increased from 23.0% last year to 21.4%.
Sales fell $ 8.28 billion to $ 7.86 billion, down 5% from the FactSet consensus of $ 8.03 billion. Geographically, sales unexpectedly dropped 0.4% organically in the United States, 4% in China / Hong Kong and 7% in Japan, and 1% in Latin America / Canada and the United States. EMEA (Europe, Middle East and Africa).
The following table details the overall performance of 3M's business lines:
| Activity Sector | Q1 2019 Turnover | Q1 2018 Turnover (% change) | Consensus FactSet | Q1 2019 operating margin | Q1 2018 operating margin |
| Industrial | $ 2.929 billion | $ 3.135 billion (-6.6%) | $ 3.067 billion | 20.0% | 22.9% |
| Security and graphics | $ 1.704 billion | $ 1.779 billion (-4.2%) | $ 1.766 billion | 23.2% | 27.1% |
| Health care | $ 1.540 billion | $ 1.535 billion (+ 0.3%) | 1.553 billion dollars | 28.1% | 29.9% |
| Electronics and energy | $ 1.190 billion | $ 1.350 billion (-11.9%) | $ 1.248 billion | 23.8% | 24.9% |
| Consumer | $ 1.123 billion | $ 1.145 billion (-1.9%) | $ 1.118 billion | 19.5% | 19.3% |
| 3M Co. | |||||
CFRA analyst Jim Corridore reiterated his 3M rating while reducing his stock price target to $ 215 from $ 215 to $ 205, saying the quarter was "bad on all fronts" .
And congratulations to JP Morgan analyst Stephen Tusa, who became even more bearish last month by reiterating his underweight rating and lowering his price target from $ 158 to $ 158, citing a "growing compromise." apparent "between sales and margins.
3M has reduced its guidance for Adjusted EPS for 2019, which excludes litigation expenses from $ 9.25 to $ 9.75 from $ 10.45 to $ 10.90.
The company said it was taking "aggressive steps" to improve productivity, reduce costs and increase cash flow, including reducing its workforce by 2,000 positions in all business groups. According to the company's annual report, this represents a workforce reduction of around 2.1%, based on 93,516 employees at the end of 2018.
"We continued to face a slowdown in key end markets, impacting both organic growth and margins, and our operational execution was also below expectations for ourselves," said the head of the company. management, Mike Roman, according to a transcript provided by FactSet.
In a conference call with earnings analysts, Nick Gangestad, Chief Financial Officer, said the industry sector had experienced a "general slowdown in most of its portfolio," highlighted by a 9% decline in its industry sector. automotive, including a 6% drop in its business figure. construction of cars and light trucks.
In response to lower volumes in the quarter, the company responded by reducing production at its plants from 4% to 5%. "Unfortunately, we have not reduced expenses proportionally," Gangestad said during the call.
"[W]We did not react aggressively enough to what we observed. So we were late at the end of the quarter, "said CEO Roman. "That's why we intervene aggressively, the actions that we are".
3M's shares have now increased slightly by 0.2%, while the SPDR Industrial Select Sector Fund
XLI, -1.87%
rose 19.9% and the Dow gained 13.7%.
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