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3M stock tumbles most in decades on poor earnings and outlook

  • 3M's stock fell 13 percent after reporting results that came up short on several counts.
  • Revenue fell 5 percent, and earnings widely missed analysts' expectations.
  • The share price drop helped pull the Dow down by 135 points, as 3M fell the most since 1988.

St. Paul, Minn. - Shares in 3M posted their biggest one-day drop in decades after the company reported first-quarter results that fell short of Wall Street projections. 3M also announced plans to cut 2,000 jobs worldwide as part of a restructuring due to a slower-than-expected 2019.

3M's stock fell nearly 13 percent (down $28.36) on Thursday, closing at $190.72. That tumble was enough to help knock the Dow industrials index down by 0.5 percent, or 135 points, on the day. By contrast, the broad market S&P 500 lost just 1 point, and the tech-heavy Nasdaq gained 17. The tumble at 3M was its biggest one-day share-price drop since 1988.

The maker of Post-it notes, industrial coatings, ceramics and other consumer products said Thursday the restructuring would reduce its number of operating units from five to four and is expected to save about $225 million to $250 million a year. The St. Paul Minnesota-based company anticipates a pretax charge of about $150 million, or 20 cents per share, this year.

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Of the five current units, only the health care group saw an increase in sales, albeit a modest 0.3 percent uptick. The other four units -- industrial, safety and graphics, electronics and energy, and consumer -- saw sales declines ranging from 1.9 percent to 11.8 percent. The company said effective April 1 it had restructured to four units: safety and industrial, transportation and electronics, and health care and consumer.

3M lowered its full-year earnings guidance. It now foresees its 2019 adjusted earnings in a range of $9.25 to $9.75 per share. Its prior outlook was for $10.45 to $10.90 per share. Analysts surveyed by FactSet expect $10.40 per share, on average.

Charges taken to resolve lawsuits

The company took a $548 million charge in the quarter, or 72 cents a share, to resolve current and future litigation. 3M set aside a reserve of $235 million for "certain environmental matters and litigation" and an additional $313 million to address current and expected coal mine dust lawsuits in Kentucky and West Virginia. Citi analyst Andrew Kaplowitz said in a client note that the litigation "may play a more prominent role in the 3M story for an extended period of time."

3M Co. earned $891 million, or $1.51 per share, in the first quarter. Adjusted for one-time costs, earnings were $2.23 per share. That missed the $2.50 per share that analysts surveyed by Zacks Investment Research were looking for.

Revenue was $7.86 billion in the period, down 5 percent year-over-year and also falling short of Street forecasts of $8.09 billion. A year ago, 3M posted adjusted earnings per share of $2.50 on revenue of $8.28 billion.