3M Stock Sinks 7% as 2026 Guidance Disappoints
Industrial conglomerate beats Q4 profit estimates but weak outlook on consumer demand sends shares to three-month low.
3M proved that beating estimates isn't always enough.
The industrial conglomerate reported fourth-quarter adjusted earnings of $1.83 per share Tuesday, three cents above consensus, on revenue of $6.1 billion. That's a clean beat by traditional metrics. But shares dropped as much as 8.8% to touch a three-month low after management issued 2026 guidance that landed a penny below Wall Street's expectations.
A penny. That's all it took to erase $4 billion in market cap.
The Guidance Gap
3M forecast full-year 2026 adjusted profit of $8.50 to $8.70 per share. The midpoint of $8.60 missed the $8.61 consensus by a single cent. Revenue guidance of 4% growth also landed roughly in line with estimates.
In most circumstances, meeting expectations would be fine. But 3M has spent the past three years restructuring after litigation costs and operational missteps battered the stock. Investors wanted acceleration, not maintenance.
CEO Bill Brown, who took the helm in 2023, acknowledged the cautious tone. "The macro environment remains uneven," he said on the call. "Consumer discretionary spending continues to pressure our retail-facing businesses."
That's code for Post-it notes and Scotch tape aren't selling like they used to.
Consumer Segment Weakness
3M's consumer business houses the products most people associate with the brand—Command hooks, Filtrete air filters, and those little yellow sticky notes. This segment has struggled for four consecutive quarters.
Revenue declined 3% in Q4 as promotional activity failed to stimulate demand. Brown blamed "weak retail traffic" and "price sensitivity among consumers"—a polite way of saying people are trading down to store brands.
The industrial and transportation segments performed better, with modest growth driven by automotive and aerospace demand. But the consumer overhang limits how bullish management can sound.
The Restructuring Progress
Credit where due: 3M's turnaround isn't failing, it's just slower than hoped.
Operating margins expanded to 24.1% in Q4, up from 21.8% a year ago. That reflects $850 million in annualized cost savings from headcount reductions and supply chain optimization. The company has cut roughly 14,000 jobs since Brown arrived.
Free cash flow of $1.4 billion in Q4 brought the full-year total to $4.8 billion—strong enough to fund the dividend, repay debt, and consider small acquisitions. 3M's balance sheet is no longer a concern.
The healthcare spinoff completed in early 2024 also removed a distraction. 3M is now a pure-play industrial company, which should eventually command a higher multiple. But "eventually" isn't good enough for investors who bought the turnaround story.
Stock Performance Context
3M shares gained 47% in 2025, outpacing the S&P 500, as investors bet on the restructuring delivering operating leverage. The stock reached $152 in late December before this week's pullback to $138.
At current prices, 3M trades at 16 times forward earnings—a discount to the industrial sector average of 19 times. Bulls argue the valuation gap should close as margins expand. Bears counter that organic growth remains too weak to justify multiple expansion.
The dividend yield of 2.3% provides some cushion. 3M has paid dividends for 106 consecutive years, a record few companies can match.
What Analysts Are Saying
Wall Street's reaction was measured disappointment rather than panic.
JPMorgan kept neutral, noting that "guidance lacks the upside catalysts we'd hoped to see at this stage of the turnaround." They see 3M as a show-me story requiring several more quarters of execution.
Citi maintained buy, calling the selloff "disproportionate to the magnitude of the miss." Their model shows 15% upside if 3M can deliver 5% organic growth in 2027—achievable if the consumer segment stabilizes.
The broader takeaway: 3M is no longer broken, but it isn't fixed either. The stock offers value if you're patient enough to wait for the consumer recovery that management keeps promising but hasn't yet delivered.
This adds to a mixed earnings picture for industrials as companies navigate an economy that's growing unevenly across sectors.