3M 2Q Wrap and Model Update

研报英文原文证据摘录

3M 2Q Wrap and Model Update

th Q1 1.88 2.14A

delivery scheduled for the back end of this year, with other examples given Q2 2.16 2.40A

Q3 2.19 2.40

including high-performance fibers for fuel cells and light reflective films for space Q4 1.83 2.01

satellites as the company is pivoting more to Class 4 (adjacent markets) and Class FY 8.06 8.95 10.05

5 (new products for new markets) innovation, which is expected to become more

Style Exposuremeaningful in the back half of the year and even more meaningful into 2027.

Additionally, 3M is tracking ahead of the ~25% margin rate by '27 (already at

24.9% in 2Q helped by volume and productivity), with the next stage of margin

expansion being simplifying and standardizing their processes, both on the SG&A

and factory side, and driving a single global service delivery model. Pricing actions

taken in 2Q is now expected to drive ~2% of pricing in the back half to offset higher

inflation, and we think that 3M can hold on to pricing even as inflation eases, a lever

for further margin expansion. Lastly, on the PFAS front, 3M has received ~$1B in

insurance recoveries to date and continues to pursue additional recoveries, which

can be offset against future liability payments. FCF conversion is strong, expected

at 100%+ for the full year, with the guidance range raised, and $700mm of proceeds

from the Scott Safety deal also available for capital deployment. We now model

LDD EPS CAGR 2025-2027 for 3M, which is on par with the sector, tweak up our

target multiple and raise our price target to $205 ($180 prior), and reiterate our OW

rating.

• 2Q beat on organic sales, margins, and EPS. Adjusted EPS of $2.40 were 14

cents above JPMe. Operating profit excl. corporate was 9c above, with S&I 8c

above, T&E 4c above, and Consumer 3c below.