3M (MMM) has revealed that its total sales for May declined 20% year-on-year to $2.2 billion- a disappointment for investors hoping to see a material month-over-month improvement. Shares are currently trading down 2% on Monday.
Meanwhile organic local-currency sales (which includes organic volume impacts and selling price changes) fell 21% while acquisitions, net of divestitures, increased sales by 2%. Foreign currency translation reduced sales by 1% year-on-year.
Total sales declined 11% in Health Care, 12% in Consumer, 17% in Safety and Industrial, with the most severe drop of 30% in Transportation and Electronics.
On a geographic basis, total sales declined 15% in Asia Pacific, 21% in the Americas, and 26% in EMEA (Europe, Middle East and Africa). Notably, China’s recovery took a step backwards from up 7% in April to down -6% in May, marking a sequential deterioration even after adjusting for the extra selling days.
MMM pointed out that the above sales information for May 2020 was impacted by two fewer business days. Excluding this headwind, the implied May organic sales decline of roughly -12% would have been sequentially in line with April.
The company will have two additional business days in June 2020 versus June 2019. As a result, there will be no year-on-year business day impact for the second quarter.
3M will host its second-quarter 2020 earnings conference call on July 28, 2020.
Shares in MMM are currently trading down 13% on a year-to-date basis, and analysts have a cautious Hold consensus on the stock’s outlook. This breaks down into 3 recent buy ratings, 6 holds and 2 sells. (See MMM stock analysis on TipRanks).
RBC Capital’s Deane Dray is one of the analysts staying on the sidelines. He notes that the company’s historical reputation for being a defensive “safe haven” has been eroded by its now-apparent sensitivity to demand softness and relatively limited forward visibility.
“With an +80% short- cycle mix and lack of any large backlog to sustain operations, 3M is acutely exposed to negative inflection points in the cycle” the analyst explains. He has a $157 price target on the stock.
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