Three years ago, 3M $MMM was a written-off company. Today, it reports record margins and raises guidance – results and annual outlook summary – stock up 6.5%
3M $MMM just released its second-quarter 2026 results moments ago. The stock is trading around $170 today (thanks to pre-market gains), roughly 2.3x higher than the 2023 trough. Management indicated today that the stock can go higher.
Q2 2026 numbers
Revenue reached $6.5 billion, up 2.4% year-on-year (GAAP), but that is misleading. Adjusted revenue grew 5.5% and organic growth was 5.4%, as GAAP figures are dragged down by the exit from PFAS manufacturing and divestitures.
Adjusted EPS came in at $2.40, up 11% year-on-year. Analysts were expecting around $2.27, so an upside surprise.
EPS was $1.78, a 33% year-on-year jump. $0.61 comes from business divestiture losses, $0.44 from litigation and PFAS exit costs, offset by a $0.60 gain from the revaluation of the stake in Solventum $SOLV.
PFAS stands for per- and polyfluoroalkyl substances, a group of several thousand synthetic chemicals that have an extremely strong carbon-fluorine bond in the molecule.
The strongest number, however, is margin. Adjusted operating margin reached 24.9%, up 40 basis points year-on-year. An industrial company approaching five times the profitability levels of a typical conglomerate is exactly what CEO Brown has been targeting. Operating cash flow was $1.0 billion, adjusted free cash flow $1.3 billion, and $1.4 billion was returned to shareholders through dividends and buybacks.
Raised outlook
The company raised full-year adjusted EPS guidance from the $8.50–$8.70 range to $8.80–$8.95. It also expects revenue growth above 4.5%, operating margin expansion of 70 to 80 basis points, and adjusted operating cash flow of $5.8–$6.0 billion. Moreover, the outlook does not yet include the Madison Fire & Rescue acquisition, which closed on July 1.
Stock rally continues
3M last week announced a strategic partnership with Microsoft $MSFT, which becomes the first hyperscale cloud provider to deploy Expanded Beam Optics technology – optical interconnects for AI data centers.
On top of that, a long-term contract with Airbus for A220 insulation materials was signed, along with a partnership with the Cadillac F1 team. JPMorgan $JPM raised its rating to Overweight last week with a $180 target, arguing that AI infrastructure-driven demand is reaching beyond the obvious winners. Goldman Sachs $GS has a $190 target.
Bernstein maintains a sell rating on 3M, while RBC lowered its target to $123. With a P/E around 31 and the stock having pulled back from the February five-year high of $177.41, the valuation is by no means cheap.
Dividend
The dividend yield is just 1.95% today, based on a quarterly dividend of $0.78.
Do you hold $MMM from the days when it traded below $100, or is this company completely outside your investment portfolio?