Will 3M (MMM) Disappoint This Earnings Season? - Analyst Blog

3M Company MMM is scheduled to report first-quarter 2014 results before the opening bell on Apr 24, 2014. In the last-reported quarter, 3M delivered a positive earnings surprise of 2.50%. Let's see how things are shaping up for this quarter.

Factors to Consider This Quarter

3M, a diversified technology company, has consistently delivered sustainable increases in revenues and earnings in the past few quarters.

3M's industrial segment, its primary growth driver, is expected to contribute significantly to the top line. Operations in emerging countries, especially China, are witnessing strengthening demand and are likely to drive revenues. However, headwinds such as macroeconomic pressures, adverse currency movements and competitive pricing might weigh on earnings.

3M is in the process of realigning its portfolio by divesting underperforming assets and investing in high-growth industries such as aerospace, energy, and healthcare. The resultant cost reductions and earnings accretion have the potential to boost earnings this quarter. But rising raw material inflation and higher research and development (R&D) expenses might be a drag on the bottom line.

Earnings Whispers?

Our proven model does not conclusively show that 3M is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: ESP or Expected Surprise Prediction, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.68%. That is because the Most Accurate estimate stands at $1.76 while the Zacks Consensus Estimate is higher at $1.79.

Zacks Rank #3 (Hold): 3M's Zacks Rank #3 lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Alaska Air Group, Inc. ALK, with earnings ESP of +7.14% and a Zacks Rank #1 (Strong Buy).

Advanced Energy Industries, Inc. AEIS, with earnings ESP of +10.00% and a Zacks Rank #1.

Convergys Corporation CVG, with earnings ESP of +10.34% and a Zacks Rank #1.