3M Reports 12% EPS Jump in Fiscal Q2

Key Points

• - Adjusted earnings per share of $2.16 surpassed expectations and Adjusted EPS rose 12% year-on-year.

• - Adjusted revenue reached $6.2 billion, beating analyst estimates on a non-GAAP basis and up 2.3% year-on-year.

• - The company raised its full-year adjusted EPS guidance to $7.75–$8.00 for 2025, despite ongoing legal settlement outflows.

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3M (NYSE:MMM), a diversified manufacturing company known for products like Post-it Notes and industrial adhesives, reported earnings on July 18, 2025. The key news in the release was a beat on both non-GAAP earnings and non-GAAP revenue versus Wall Street estimates. The company posted adjusted earnings per share of $2.16, higher than the $2.01 analyst expectation (non-GAAP). Adjusted revenue was $6.2 billion, topping the $6.12 billion non-GAAP consensus. The report showed continued progress in operational improvements and organic growth, even as legal costs and global trade issues persisted. Management described the period as one of continued momentum, with raised adjusted EPS guidance for the remainder of FY2025.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding 3M’s Business and Priorities

3M (NYSE:MMM) operates as a diversified technology company, manufacturing products used across industries ranging from electronics and automotive to consumer goods. Its product lines include adhesives, abrasives, filtration products, safety equipment, and office products.

The company organizes its business around three core segments: Safety and Industrial, Transportation and Electronics, and Consumer. Its recent strategic moves have included increasing investment in innovation and focusing its business portfolio by spinning off the Health Care segment. 3M’s key success drivers are its ability to bring new products to market, manage legal and regulatory headwinds, excel in manufacturing efficiency, and maintain solid free cash flow.

Quarter in Review: Key Financials and Developments

Safety and Industrial organic sales increased 2.6%, Transportation and Electronics saw a 1.4% decline in organic sales, and Consumer recorded 0.3% growth. Margin improvement was a standout; adjusted operating margin reached 24.5%, up from 21.6% in the prior year period.

The revenue figure (non-GAAP) exceeded analyst expectations, supported by adjusted organic sales growth of 1.5% year-on-year. Management noted strong global demand for electrical markets and industrial adhesives. The company also benefited from a currency tailwind, as translation effects boosted global sales by 0.8%.

Legal expenses remained a significant factor for 3M, as net costs for significant litigation reached $0.79 per share, higher than $0.44 per share in the comparable period last year. Cash flow was affected by $2.2 billion in after-tax payments for legal settlements related to PFAS (per- and polyfluoroalkyl substances) and Combat Arms Earplugs cases. These items weighed on GAAP earnings, which fell to $1.34 per share, a 38% decrease from a year earlier. However, non-GAAP results, which exclude major litigation and special items, showed improvement.

Dividends and capital return to shareholders continued, with $1.3 billion distributed through dividends and share buybacks. The company increased share repurchases to a $2 billion pace for the full year, up from its initial plan of $1.5 billion.

Business Segments, Geography, and Product Updates

Each core segment had areas of strength and challenge. Safety and Industrial products include personal protective equipment and industrial adhesives. This segment posted solid sales and operational improvement. The Transportation and Electronics segment, which manufactures products like electronic assembly materials and automotive components, saw organic sales decrease but improved margins thanks to business mix and cost controls. Consumer products, which include items like Command hooks, Scotch tape, and home improvement consumables, showed steady demand but relatively flat revenue.

Sales in China specifically rose 5.8%. Sales in Europe, the Middle East, and Africa declined by 2.3% on an organic basis. Management attributed some of this regional divergence to external demand trends, particularly in automotive and consumer markets.

Product innovation, a core competitive advantage for the company, remained a management focus, although the user-facing release did not detail specific Q2 launches. 62 new products hit the market, with a company-wide goal of more than 215 launches this fiscal year. Manufacturing equipment utilization improvement was reported at 58%, a tenfold increase over last year.

On the regulatory front, the company highlighted its progress toward phasing out PFAS manufacturing by year-end. Environmental compliance continues to be a priority, with management noting ongoing investments but without major new “green” announcements this quarter.

Beyond products, management pointed to ongoing employee engagement, safety, and operational excellence initiatives, though no new workforce programs were described in this release.

Forecast and What to Watch

Management raised its full-year adjusted (non-GAAP) earnings per share outlook to a range of $7.75 to $8.00, up from the prior $7.60–$7.90 range. Sales are now guided up 2.5% for the full year, with 2.0% expected organic growth for the full year. Adjusted operating cash flow is projected in the $5.1–$5.5 billion range for the full year. This guidance factors in the effect of recently introduced tariffs, which are anticipated to become more impactful in the second half of the year. Tariffs specifically target products imported from China, with management working on mitigation strategies, such as alternative sourcing and pricing adjustments.

The company highlighted several areas for ongoing attention. These include potential cash flow variability due to continuing legal settlements, tariff-related risks to margins and revenue in the second half of the year, and uneven growth among business segments and geographies. Management stated it remains confident in its mitigation plans but acknowledged persistent risks and the need for continued operational discipline.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends 3M. The Motley Fool has a disclosure policy.