3M’s strong sales to the health care industry — buoyed by its N95 masks — helped offset negative effects to other businesses because of the coronavirus pandemic.
The health care increase, as well as burgeoning sales of household items, helped 3M beat Wall Street’s third-quarter profits and sales forecasts, the company said Tuesday.
3M’s third-quarter profits were $1.41 billion, or $2.43 per share, down 11% over a year ago but nicely above the $2.26 consensus estimate by stock analysts. Third-quarter sales tallied $8.4 billion, up 4.6% over a year ago and topping estimates of $8.29 billion.
3M’s “diverse geographic footprint and product portfolio has helped it maintain strong margins amid the pandemic,” Colin Scarola, an analyst at CFRA Research, wrote in a note Tuesday.
3M has been battered by the economic crisis caused by the coronavirus pandemic, with the company posting double-digit sales and profit declines during its second quarter. But the situation mostly turned during the third quarter — at least from a sales perspective.
Only one of 3M’s four main divisions — transportation and electronics — posted a revenue decline.
“We returned to positive organic sales growth with sequential improvement across businesses and geographies,” 3M Chief Executive Mike Roman said in a news statement.
Still, in a conference call Tuesday with stock analysts, Roman and Chief Financial Officer Monish Patolawala, both noted significant “uncertainty” about where business is headed as COVID-19 continues to rage.
Sales growth in October looks to be flat or in the low single-digits, Patolawala said.
3M’s stock closed at $161.03 Tuesday, down $5.13 or 3%.
The pandemic has had wide-ranging effects on Maplewood-based 3M’s performance.
“Our entire business model has been impacted one way or another by COVID-19,” Roman said in the conference call.
Sales in 3M’s health care business rose 25% over a year ago to $2.2 billion; not counting acquisitions or currency fluctuations, they increased 8%.
The health care sector was helped by sales of N95 respirators, seen as the gold standard for protecting health care workers from COVID-19.
3M has produced 1.4 billion N95s year-to-date, and says it is on track to hit its 2 billion target for all of 2020 — double the annual rate before the pandemic hit.
N95 respirators sales are expected to add three percentage points to fourth quarter sales.
Next year, the company expects to manufacture 2.4 million to 2.5 billion N95s.
“We believe demand continues for a long time,” Patolawala said.
Elsewhere in 3M’s health care business, cancellations for elective surgeries due to COVID-19 continued to drag down sales during the third quarter.
However, oral care, which has been hammered by dentist cancellations, returned to growth.
In 3M’s largest unit, safety and industrial, sales rose 6.9% to $3 billion. Sales of granules for roof shingles were notably strong.
3M’s consumer business tallied $1.4 billion in sales, up 5.6% and boosted by home care and home-improvement products.
The U.S. home improvement industry generally has gotten a boost this year as more people are working on household projects during the pandemic.
Sales for 3M’s health care, consumer and safety and industrial divisions rose in the Americas and Europe and the Middle East and Africa, but fell in Asia.
All three sectors posted double-digit increases in operating profits during the third quarter.
But with the global auto industry still in the dumps, sales at 3M’s transportation and electronics business fell 7.4% during the third quarter across all geographies, settling at $2.3 billion. Worse, its operating profits fell by 13 % over a year ago.
A general decline in consumer electronics demand, particularly smartphone sales, has also hampered the transportation and electronics business, Roman told analysts.