3M Stock Drops Amid Q2 Earnings Beat, Raises FY Guidance

3M shares fell 4.2% after the company reported Q2 earnings that beat expectations but showed concerns for investors. Adjusted EPS of $2.16 beat the consensus, and full-year guidance was raised to $7.75-$8.00. However, GAAP EPS decreased 38% YoY and a negative operating cash flow of $1.0 billion was reported due to significant litigation costs and renewed trade worries. Despite this, the stock has gained 17.1% this year and is trading close to its 52-week high.

3M (NYSE: MMM) reported its second-quarter 2025 earnings, with adjusted EPS of $2.16, which exceeded analysts' expectations. However, the stock fell 4.2% after the release, reflecting investor concerns over the company's financial health. The GAAP EPS decreased 38% year-over-year (YoY) to $1.34, and the company reported a negative operating cash flow of $1.0 billion due to significant litigation costs and renewed trade worries [1].

The company's adjusted operating income margin increased to 24.5%, up 2.9 percentage points YoY, and adjusted sales grew 2.3% YoY to $6.2 billion. However, GAAP sales increased only 1.4% YoY to $6.3 billion, with organic sales growth of 0.6% YoY. The full-year EPS guidance was raised to $7.75-$8.00, reflecting the company's performance in the first half of the year and the impact of tariffs [1].

Despite the mixed signals, 3M's stock has gained 17.1% this year and is trading close to its 52-week high. The company attributed the decrease in GAAP EPS to special items, including a decrease in the value of Solventum ownership and pension risk transfer charge. The negative operating cash flow was primarily driven by $2.2 billion in net after-tax payments for significant litigation costs, primarily related to Public Water Systems and Combat Arms Earplugs [1].

William Brown, 3M Chairman and CEO, stated, "We delivered strong results in the second quarter, posting positive organic sales growth and double-digit EPS growth. This continues our trend from Q1 with all three business groups growing organically for the third quarter in a row." He also noted that the company's 3M eXcellence operating model drives the operating rigor and rhythm of its performance culture [1].

Investors should be aware of the company's exposure to litigation costs and trade worries, which could impact its financial performance in the future. Additionally, the company's full-year guidance reflects the expected impact of tariffs, which could pose a risk to its financial results [1].

References:

[1] https://investors.3m.com/news-events/press-releases/detail/1897/3m-reports-second-quarter-2025-results-increases-full-year