(Bloomberg) -- 3M Co. slid as double-digit sales declines dented profit margins amid the Covid-19 pandemic.
“Overall, we view the results to be disappointing considering 3M's previously perceived defensiveness (driven by Healthcare) and overall margin miss -- particularly when other industrials are meaningfully beating on margins,” Gordon Haskett analyst John Inch said in a note to clients Tuesday.
Although Chief Executive Officer Mike Roman said sales trends are improving across its business lines this month, investors focused on a second-quarter drop in adjusted operating margin to 19.6% from 20.8% a year earlier. Profit and revenue missed analyst estimates as compiled by Bloomberg.
The results indicated the pressure on the Saint Paul, Minnesota-based maker of Post-it notes and automotive adhesives. Although 3M is on track to triple production of N95 respirators this year to protect against Covid-19, sales fell broadly as the auto, construction and health-care industries shrank in the pandemic-induced recession.
The shares dropped 4.3% to $156.20 at 12:58 p.m. in New York, marking the sharpest decline on the Dow Jones Industrial Average. 3M fell 7.5% this year through Monday, while the blue-chip gauge slumped 6.8%.
Second-quarter organic sales fell 13.1% from a year earlier, the company said in a statement, led by a 19% decline in the transportation and electronics segment and a 12.4% drop in health care.
The company cut second-quarter costs about $400 million, but such savings are expected to be temporary. The benefits were offset by the sales decline and restructuring expenses, departing Chief Financial Officer Nick Gangestad said on a call with analysts.
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