3M's Margins Expand Despite Rising Costs: Can the Momentum Sustain?

3M Company MMM has been grappling with rising costs and expenses over time. MMM reported an uptick in operating expenses during the second quarter of 2025. The company’s cost of sales rose 2.1% year over year in the quarter, while SG&A expenses climbed approximately 12% year over year. Research and development (R&D) expenses also increased 2.9% year over year in the same period. Key factors behind the company’s high costs included increased restructuring charges, higher investments in innovation and ongoing legal and tariff-related impacts.

Despite the rising costs, in the second quarter, MMM’s adjusted operating margin improved 290 basis points to 24.5%. The margin improvement was supported by productivity initiatives, cost discipline and favorable product mix. In the quarter, 3M’s adjusted earnings grew 11.9% year over year to $2.16. Also, the company generated revenues of $6.34 billion, up 1.4% year over year, driven by strength across the majority of its businesses.

3M’s focus on effective cost management and productivity gains is likely to help sustain its margin performance. For full-year 2025, the company raised its EPS guidance to a range of $7.75–$8.00 compared with $7.60-$7.90 expected earlier, implying strong business momentum despite restructuring and tariff-related headwinds. At the same time, 3M continues to advance its structural reorganization program, aimed at streamlining operations and supply-chain optimization. These actions are expected to support ongoing margin improvement and operational efficiency.

Margin Performance of MMM’s Peers

Among 3M’s major peers, Honeywell International Inc. HON is facing cost pressure. In the second quarter of 2025, Honeywell’s total cost of sales (cost of products and services) was about $6.33 billion, up 8.1% year over year. Selling, general and administrative expenses increased 4.9% year over year. In the same period, Honeywell’s operating income margin was 20.4% compared with 20.7% in the year-ago period.

The escalating costs and expenses are also a concern for ITT Inc. ITT. In the second quarter of 2025, ITT’s cost of revenues increased 6.2% year over year to $625.6 million and sales and marketing expenses rose 6.2% to $57.0 million. However, ITT’s adjusted operating income margin expanded 30 basis points to 18.4% driven by productivity gains, higher volumes and favorable pricing.

The Zacks Rundown for MMM

Shares of 3M have gained 23.9% in the past six months compared with the industry’s growth of 2%.

From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 18.98X, above the industry’s average of 16.41X. MMM carries a Value Score of D.

The Zacks Consensus Estimate for MMM’s earnings has increased over the past 60 days.

MMM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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