3M forecasts annual profit below estimates amid sluggish consumer demand

By Aatreyee Dasgupta

Jan 20 (Reuters) - Industrial giant 3M MMM.N forecast annual profit slightly below Wall Street's expectation on Tuesday, pointing to a challenging and uneven demand backdrop, even as it tightens costs to shield margins.

Shares of the Saint Paul, Minnesota-based company fell 7.5% in morning trade.

Weak demand in the United States, softer retail markets and discretionary spending pressures continued to weigh on the company's consumer segment, resulting in a 1.2% fall in segment sales in the October-to-December period, from a year ago.

The U.S. consumer sentiment index deteriorated in November and December, highlighting moderation in spending after it surged in the third quarter, as anxiety over jobs and the economic outlook grew.

3M's roofing granules and automotive aftermarket businesses are expected to remain pressured by the challenging macroeconomic environment in the beginning of 2026, CEO Bill Brown said during an earnings call on Tuesday.

However, on the call, CFO Anurag Maheshwari further noted 3M expects "the macro in 2026 to be a little bit better."

3M's cost cuts, price hikes and the introduction of new products under CEO Brown have helped the company cushion margins from weak demand against a prolonged inflationary backdrop.

3M reported quarterly operating margin of 23.4%, up from 21.4% the year earlier. It targets an operating margin of 25% by the end of 2027.

The company forecast 2026 adjusted profit between $8.50 and $8.70 per share, with the midpoint a cent short of analysts' estimate of $8.61, according to data compiled by LSEG.

Brown said that the existing 20 cents impact from tariffs is embedded in the profit forecast range.

If President Donald Trump's recent tariff hike vows on eight European nations over Greenland play out, Brown added it could result in a $30 to $40 million impact this year.

The company's adjusted profit stood at $1.83 per share during the fourth quarter, compared with analysts' estimate of $1.80 per share.

Quarterly adjusted revenue of $6.02 billion, came slightly above estimates of $6.01 billion.