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3M Co. (NYSE: MMM) stock surged Tuesday after the company raised its 2026 earnings guidance and said it expects to exceed its 2027 Investor Day targets.
Strong industrial demand, new products and cost reductions supported third-quarter results. Meanwhile, growing demand from data centers and semiconductor customers strengthened the company's growth outlook.
3M's Safety and Industrial segment reported 7% organic sales growth, supported by new products and stronger data center demand.
Transportation and Electronics sales rose 0.5%. However, sales excluding consumer electronics increased about 5%, driven by aerospace and semiconductor demand.
Consumer sales remained flat as stronger international demand offset U.S. retailer inventory adjustments.
Together, Safety and Industrial and Transportation and Electronics account for 80% of 3M's business. Their combined sales grew 4% in the third quarter and 4.5% year to date.
Regional results also improved. Sales rose 7% in the U.S. and Canada, marking the strongest growth since the pandemic. Latin America recorded high-single-digit growth, while Europe expanded for a second consecutive quarter.
India delivered another double-digit increase. However, China sales fell at a high-single-digit rate amid weak consumer electronics demand.
Meanwhile, semiconductor and data center businesses maintained double-digit growth. Automotive demand also improved, although original equipment sales remained weaker than aftermarket demand.
3M launched 87 products during the quarter, up 24% from a year earlier. The company expects to exceed its annual target of 350 launches.
Year-to-date sales from products introduced over the past five years jumped 34% to nearly $3 billion.
Additionally, cross-selling generated $140 million in booked wins, with another $120 million in the pipeline. That exceeded the company's original three-year target of $100 million.
Productivity improvements helped lift gross margins by 230 basis points year over year. Pricing also offset higher raw material and oil costs.
3M closed 16 manufacturing and distribution facilities year to date. The company plans changes at 10 additional locations over the next 12 months.
These actions are expected to support further margin improvements beyond 2027.
The combined Madison Fire and Rescue business delivered high-single-digit pro forma growth, while operating margins exceeded both the acquisition model and 3M's companywide margin.
On Monday, 3M announced a partnership with Amazon.com Inc. (NASDAQ: AMZN) involving expanded beam optics technology for AI data centers.
3M previously partnered with Microsoft Corp. (NASDAQ: MSFT) to deploy expanded beam optics technology. It also conducted proof-of-concept work with five global hyperscalers, including Amazon Web Services, before expanding its Amazon partnership.
Beyond AI infrastructure, 3M introduced reflective film for a commercial satellite constellation.
The company also plans to launch a moisture-resistant solar panel barrier in the fourth quarter. More than 10 additional space materials projects remain under development.
3M reported adjusted third-quarter earnings of $2.50 per share, up 12% year over year and above the $2.39 analyst estimate.
Revenue rose 4.2% to $6.6 billion but narrowly missed the $6.61 billion consensus estimate.
Following the results, 3M raised its 2026 adjusted earnings forecast to $9.10-$9.15 per share from $8.95-$9.10 on a comparable accounting basis. The previous forecast was $8.80-$8.95 under the earlier reporting method. The revised range also topped analysts' $8.94 estimate.
The company expects full-year adjusted sales to exceed $25.37 billion, compared with analysts' $25.45 billion forecast.
3M maintained its 2026 adjusted operating margin forecast of approximately 24.6% under its revised reporting basis and its adjusted free cash flow target of about $4.8 billion.
However, expected oil-related inflation increased to $185 million from the previous $150 million-$175 million range.
Management expects pricing to offset those costs. Meanwhile, productivity gains should help limit the estimated 20-basis-point margin impact.
Looking ahead, 3M expects to exceed its 2027 Investor Day targets, including its 25.4% operating margin goal.
The company anticipates continued sales momentum, supported by product innovation, supply chain improvements and transformation initiatives.
Management also expects earnings growth, stable taxes and share repurchases to support adjusted earnings per share.
MMM Price Action: 3M shares were up 6.00% at $171.73 at the time of publication on Tuesday, according to market data.
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