3M Slumps Most in 4 Years After Paring 2015 Forecast Again

Why Is 3M Slashing Its Profit Forecast Again?
  • Manufacturer's pullback follows cut in outlook in October
  • `It does reflect the reality globally of what we’re seeing'

3M Co. tumbled the most in more than four years after the maker of Post-it Notes and industrial products cut its 2015 profit forecast for the second time in as many months, blaming sluggish growth in the world economy.

The new annual projection implies a drop in sales in the final three months of 2015, “reflecting what is shaping up to be the first quarter of negative organic revenues for 3M since 2009,” RBC Capital Markets analyst Deane Dray said Tuesday in a note to clients after the company’s annual outlook meeting.

3M’s struggles highlights its dependence on international markets, which account for about two-thirds of sales. Less than two months ago, 3M trimmed the top of its profit forecast and announced 1,500 job cuts in a global restructuring effort to fight slow growth and a strong dollar that weighed on international sales.

“It does reflect the reality globally of what we’re seeing,” Chief Financial Officer Nick Gangestad said on a conference call with investors and analysts.

Earnings this year will be about $7.55 a share, down from previous range of $7.60 to $7.65 a share, 3M said. Analysts on average had estimated earnings of $7.62, according to data compiled by Bloomberg. 3M cut its forecast for organic sales growth to about 1 percent from 1.5 to 2 percent.

3M slumped 6 percent to $148.13 at the close in New York, the sharpest drop since October 2011. The decline put the shares down 9.9 percent this year.

Chief Executive Officer Inge Thulin has emphasized organic growth overseas and new-product development since taking the helm in 2012. This year he reshaped 3M with deals that include its largest-ever acquisition.

“We are building a company positioned to drive efficient growth,” Thulin said on the call.

The St. Paul, Minnesota-based company forecast 2016 organic sales growth of 1 to 3 percent in local currency and earnings of $8.10 to $8.45 a share, up 7 to 12 percent. 3M sees currency exchange reducing sales next year by 1 percent to 3 percent and trimming earnings by as much as 30 cents a share.

“3M’s growth metrics for 2016 are in line with or slightly better than we thought, albeit off a lower 2015 base,” Nicholas Heymann, an analyst at William Blair & Co., said Tuesday in a note.

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