‘Momentum in the water’ as 3M profits top expectations

The captain of industrial powerhouse 3M says the manufacturer is charting the right course after a summer of strong profits.

“All of this is momentum in the water,” CEO Bill Brown said.

Maplewood-based 3M beat Wall Street expectations for its most recent quarter, and the company upped its financial forecast for the rest of the year.

However, increased sales are not pushing the profit increase. Sales for the quarter and the full year so far are nearly flat.

After several years spent in transition — including the spinoff of its health care business, billions in legal settlements, major layoffs, restructuring, a new leader — 3M now appears to be reaping the benefits of an expensive and historic transformation of the 122-year-old company.

Brown said there’s more to be done on the three priorities he’s emphasized since taking the helm in May — sales growth, supply chain improvements and smart spending — but the third quarter “positions us well to deliver a strong finish to the year.”

The company is hiring more engineers and putting R&D dollars back into new product development to make good on Brown’s pledge to push more innovation onto shelves.

“We’re spending a lot of time thinking about where we put our precious $1 billion in R&D,” Brown said.

New product launches are up 10% over last year and will accelerate into 2025 and beyond, he said.

But he wants to take a hard look at the company’s sales force, incentives, training, distributors and prices to “get better at selling what’s on the market today” and ensuring that it can reach customers, Brown said. That’s an issue that has slowly improved this year.

“We’ve lost business because we don’t have product ready to go,” he said, and the company has paid fines to its customers as a result.

Sales grew less than 1% to $6.3 billion for the quarter that ended in September, and the company now expects to finish the year with annual sales about 1% above 2023 and adjusted earnings per share of $7.20 to $7.30.

3M reported a $1.3 billion profit, and adjusted earnings per share of $1.98 topped analyst estimates by 8 cents and rose 18% from last year. Investors sent the stock down about 2% for the day.

New Chief Financial Officer Anurag Maheshwari, who started last month, said as 3M’s transformation bears fruit, “it gives us confidence to expand operating margins next year while driving top line growth.”

Revenue growth “is going to be a longer-term story,” Brown said. “Growth is going to take some time, and it will be around innovation. We’ve taken the right steps.”

One of those steps is tweaking the company’s remote work policy to bring senior leaders back to the office and encourage other employees to join them three days a week.

“We need to refocus the company around growth and reinvigorating innovation,” Brown said. “It’s hard to do that when we’re off-site five days a week.”