How Did 3M Fare In Q1?

3M (NYSE: MMM) exceeded expectations in its recently released Q1’25 results. The company reported adjusted revenue of $5.95 billion and adjusted earnings per share of $1.88, both figures surpassing consensus estimates of $5.73 billion and $1.77, respectively. This positive performance was further reinforced by the company’s reiteration of its 2025 outlook, which was well-received by the market. However, if you are looking for an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

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In the first quarter of 2025, 3M’s revenue of $6.0 billion, reflected a 1% decrease year-over-year. This overall decline was driven by varied performance across its segments. The Transportation and Electronics segment experienced the largest drop in sales, down by 5.4%, while the Consumer segment also saw a decrease of 1.4%. Conversely, the Safety & Industrial segment demonstrated modest growth with a 0.5% increase in revenue. 3M’s recent tepid sales growth can be attributed to factors such as ongoing supply chain disruptions, persistent high inflation, and a strengthening U.S. dollar. Additionally, the consumer business has faced headwinds due to reduced demand in home improvement, auto-care, and packaging sectors.

Despite the slight revenue dip, 3M achieved a significant expansion in its profitability. The company’s adjusted operating margin increased by 220 basis points year-over-year to 23.5% in Q1. This margin improvement directly contributed to a 10% rise in the adjusted bottom line, reaching $1.88 per share. Looking ahead, 3M anticipates its full-year 2025 adjusted earnings per share to fall within the range of $7.60 to $7.90, with an additional potential negative impact of $0.20 to $0.40 per share from tariffs.

The market reacted positively to this earnings report and outlook, with MMM stock experiencing a 6% surge. However, a longer-term perspective reveals a more inconsistent performance for MMM stock. Over the past four years, its annual returns have been more volatile compared to the S&P 500, registering 5% in 2021, -30% in 2022, -3% in 2023, and a significant 46% in 2024.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is much less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Considering the current macroeconomic uncertainties surrounding tariffs and the escalating trade tensions with China, the question arises whether MMM might underperform the S&P 500 over the next year, echoing its performance in 2021, 2022, and 2023, or if it’s poised for a significant upward movement. While our model will soon be updated to incorporate the latest earnings data, our initial assessment suggests limited near-term growth potential for MMM stock.

Currently trading at $134, MMM stock has a trailing price-to-earnings (P/E) ratio of 18x, which is higher than its five-year average P/E of 16x. Although 3M delivered a solid first quarter, the recent stock rally appears to have constrained further growth in our view. Consequently, investors considering an entry point might find it more advantageous to await a potential dip in the stock price.

While MMM stock looks like it is appropriately priced, it is helpful to see how 3M’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

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