3M: A Dip, a Puzzle, and Possibly a Bargain

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The market, that famously fickle entity (rather like a slightly damp tea cosy, if you think about it), has decided to be unimpressed with 3M’s recent pronouncements. Earnings reports and guidance for 2026 were met with the sort of enthusiasm usually reserved for a lukewarm bowl of porridge. But here’s the thing – and it’s a rather important thing, actually – the disappointment seems to stem from the general state of the universe (or, more precisely, macroeconomic outlook), rather than any fundamental failing within 3M itself. CEO Bill Brown appears to be enacting a restructuring, a sort of internal re-alignment of molecules, which is, surprisingly, improving things. Margins are nudging upwards, productivity is… well, producing, and innovation is tentatively bubbling. All of which suggests that when the end markets decide to cooperate – and that’s a big ‘when’, isn’t it? – 3M could do rather well.

3M Continues to Outperform Its End Markets (Or, The Relentless March of… Something)

Investors, it seems, were hoping for more than a mere 3% organic sales growth in 2026. A modest ambition, one might think, but apparently not enough to set pulses racing. 2025’s full-year organic sales growth, at a paltry 2.1%, also failed to inspire. It was, as they say, at the low end of the range. (Which is a bit like saying a particularly lukewarm bath is “at the low end of the temperature range.” Technically correct, but hardly a ringing endorsement.) The problem, as near as anyone can tell, isn’t 3M, it’s…everything else.

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Regardless of which way you attempt to view the numbers – and trust me, there are many ways, some involving string, some involving small woodland creatures – 3M’s end markets aren’t exactly throwing a party. However, management’s guidance for 2026 earnings per share (EPS) of $8.50 to $8.70 implies a growth rate of 5.5% to 7.9%. This is, statistically speaking, significantly higher than their estimate of 1.5% growth for the global industrial production index in 2026. (Which raises the question: are they predicting a slightly gloomy future for the world at large? Or are they just particularly good at making things? The answer, as always, is probably both.) They estimate 2% growth in 2025, so they’re anticipating a slight uptick. A small uptick, admittedly. A barely perceptible uptick. But an uptick nonetheless.

3M’s Restructuring is Working (Or, The Gentle Art of Re-Arranging Molecules)

This relative improvement, this barely discernible glimmer of hope, is largely down to Bill Brown’s operational restructuring. It’s improved on-time in-full delivery rates (which, let’s be honest, is a good thing), increased asset utilization (more bang for your buck, as they say), reduced losses due to quality issues (fewer things falling apart), and focused on new product introductions (NPIs). And the NPIs are multiplying. 169 in 2024, a respectable number. Growing to 284 in 2025. And projected to reach 350 in 2026. (At this rate, they’ll be launching a new product every day. Which, depending on what the products are, could be either a brilliant strategy or a recipe for utter chaos.)

3M Stock is a Buy (Or, A Perfectly Reasonable Thing to Do With Your Money)

There are, I believe, three compelling reasons to consider acquiring 3M stock. Firstly, the NPIs. A significant portion of their earnings growth in 2026 is projected to come from what management terms “price/volume” and “net productivity.” These NPIs are critical because they tend to command higher prices and are, crucially, differentiated products. (Something 3M struggled with under the previous CEO, Mike Roman, who, it must be said, had a perfectly reasonable excuse: he was distracted by a particularly complex game of chess with a sentient toaster.)

Secondly, the areas of weakness 3M is currently experiencing – interest-rate-sensitive sectors like auto builds, auto aftermarket, consumer discretionary, and roofing granules – could all improve in a lower-interest-rate environment in 2026. (Assuming, of course, that the universe decides to cooperate. Which is, as we all know, a rather large assumption.) The good news is that their largest segment is performing well, while the problematic segment is their smallest. (Which is a bit like having a small leak in a very large boat. Annoying, yes, but not immediately catastrophic.)

3M Fourth-Quarter Organic Sales Growth Full-Year Organic Sales Growth Full-Year Sales
Safety & Industrial 3.8% 3.2% $10,961 million
Transportation & Electronics 2.4% 2% $7,435 million
Consumer (2.2%) (0.3%) $4,931 million

A Good Value Stock (Or, A Reasonably Sensible Investment)

Finally, the stock’s forward price-to-free-cash-flow (FCF) multiple of 18 is attractive for a mature industrial company growing earnings at a high single-digit rate. Moreover, their guidance assumes a moderate economic outlook; for example, they’re assuming no growth in U.S. industrial production in 2026. (Which, let’s face it, is a perfectly plausible scenario.) Any improvement in that outlook could boost earnings expectations, suggesting the risk is skewed to the upside. And with the stock looking undervalued as it is, it appears to be a reasonably sensible investment at this juncture. (Though, as always, past performance is no guarantee of future results. And the universe is, ultimately, a chaotic and unpredictable place.)

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2026-01-26 16:32