3M Structural Reorganization Actions in Motion: Will It Boost Margins?

3M Company MMM has been undertaking structural reorganization actions to reduce the size of its corporate center, streamline its geographic footprint, simplify the supply chain and optimize manufacturing roles to align with production volumes. As part of its restructuring program, the industrial conglomerate announced significant job cuts and spun off its healthcare business into a publicly listed company in 2024. These actions have been reducing MMM’s operational costs and improving margins and cash flow. For instance, the company’s total operating expenses fell 3.3% in the first quarter of 2025, following a 44% decline in 2024.

In the first quarter, these actions, together with strong organic volume and productivity, raised 3M’s adjusted operating margin by 220 basis points year over year to 23.5%. Benefiting from its efforts to boost sales and reduce costs, 3M provided strong financial guidance for 2025. For the year, the company expects adjusted earnings to be in the range of $7.60-$7.90 per share. The midpoint of the guided range is $7.75, which reflects an increase from earnings of $7.30 per share reported in 2024. Adjusted organic revenues are projected to grow 2-3%, while the adjusted operating margin is expected to expand 130-190 basis points year over year.

Margin Performance of MMM’s Peers

Among 3M’s major peers, Griffon Corporation GFF witnessed an increase in its adjusted gross margin from 40.4% to 41.2% in the first quarter. Griffon’s focus on cost-management actions and operational efficiency has been beneficial. In the first quarter, Griffon’s cost of sales and selling, general and administrative expenses (SG&A) declined 10.6% and 3.9%, respectively.

MMM’s another peer, Honeywell International Inc.’s HON operating margin contracted 30 basis points to 20.1% in the first quarter. Honeywell’s cost of sales (cost of products and services) increased 8.1% year over year, while SG&A expenses were up 4.5%. The increase in operating expenses adversely impacted Honeywell’s margins during the quarter.

The Zacks Rundown for MMM

Shares of 3M have gained 14.8% in the year-to-date period compared with the industry’s growth of 0.6%.

From a valuation standpoint, 3M is trading at a forward price-to-earnings ratio of 18.72X, above the industry average of 16.87X. The metric is pegged higher than its five-year median of 15.98X. MMM carries a Value Score of D.

The Zacks Consensus Estimate for MMM’s earnings for second-quarter 2025 and 2025 have declined 1.5% and 1.8%, respectively, in 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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