By Kannaki Deka
(Reuters) -3M Co raised its full-year profit forecast on Tuesday, after strong demand for roofing material, industrial adhesives and electronic equipment helped the U.S. manufacturing giant beat quarterly profit estimates.
Shares jumped 5.6% to $142.36 before the bell, as 3M announced it was reviewing its portfolio and had initiated a sale process for “a few small businesses”.
CEO Bill Brown, who succeeded Mike Roman in May, said in July he would focus on new product development, which has lagged as the company shifted spending to mitigate legal liabilities and reduce supply-chain costs.
The Saint Paul, Minnesota-based company has posted upbeat results in recent quarters after suffering last year from a slump in consumer demand due to high inflation and weak China market.
In response, 3M initiated thousands of job cuts and spun off its healthcare business into a listed company, to mitigate the impact from a demand slowdown. Investors have responded by sending 3M shares up 47.5% this year.
3M said on Tuesday two of its three main businesses had recorded organic sales increases, while its consumer business suffered from weak demand in areas such as packaging and home and auto care.
The company still faces lawsuits related to water pollution claims tied to Per- and polyfluoroalkyl substances, also known as “forever chemicals”.
“While the 3M story has some new positive momentum with the leadership change, we still believe the ultimate cost of PFAS liabilities remain(s) a sizable risk to cash flow and implied valuation,” RBC Capital Markets analyst Deane Dray said.
3M expects its full-year adjusted profit to be between $7.20 and $7.30 per share, compared with its previous forecast of $7.00 to $7.30 per share.
The upbeat forecast comes as analysts expect the broader industrial sector to benefit after the U.S. Federal Reserve cut borrowing costs in September.
3M’s third-quarter adjusted profit of $1.98 per share beat expectations of $1.90, whereas sales of $6.07 billion were slightly above expectations.
