Snapshot
3M Co reported $6.03B of revenue in Q1 2026, up 1.3% year over year, with diluted EPS of $1.23 and an operating margin of 23.2%.
- Revenue
- $6.03B
- YoY growth
- +1.3%
- Diluted EPS
- $1.23
- Operating margin
- 23.2%
What management said
- •Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3m.com.
- •We delivered solid operating performance in Q1 with earnings per share of $2.14, up mid-teens versus last year.
- •Operating margin increased 30 basis points to 23.8%, and free cash flow was over $500 million, up double digits.
- •We had a light start to the year on the top line with organic growth of 1.2%, driven by pockets of macro pressure.
- •We saw encouraging order trends that support our outlook for acceleration in the balance of the year.
- •Looking forward, we remain confident in achieving our full year 2026 guidance despite the volatile environment.
- •To date, we've closed on approximately $80 million of new business against the three-year, $100 million target we laid out at Investor Day with a pipeline of $85 million of additional cross-sell opportunities.
- •OEE improved over 100 basis points year-on-year as we optimize asset run length, runtime, and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage.
- •Cost of poor quality decreased by approximately 100 basis points versus Q1 last year, driven by more structured root cause analysis, significantly increased Kaizen activity, and tighter process controls.
- •For example, transitioning from solvent to solvent-free coating, which brings cost, capital, and environmental benefits.
- •When we automated the slitting operation at our Nevada facility late last year, we achieved a 30% increase in square yards per hour productivity.
- •Over time, this transformation will allow us to accelerate towards a structurally higher growth, higher margin potential portfolio of priority verticals.
What went well
- •EPS of $2.14 grew 14% (up $0.26) year-over-year, with adjusted operating margin up 30 basis points to 23.8% despite roughly $145 million of tariff, stranded cost and investment headwinds.
- •Orders grew slightly more than 10% with backlog up 20% year-over-year and 35% sequentially, providing 400-500 basis points of additional coverage and accelerating through the quarter into the first weeks of April.
- •Launched 84 new products, up 35% versus last year, on pace for 350 in 2026 and ahead of the Investor Day target of 1,000 new products through 2027.
- •Returned $2.4 billion to shareholders, including ~$400 million in dividends (a 7% per-share increase) and $2 billion of opportunistic share repurchases; adjusted free cash flow was $540 million, up 10%.
- •Operational excellence progress: OEE improved over 100 basis points year-on-year, cost of poor quality decreased ~100 basis points versus Q1 last year, inventory cut by three days and lead time by 25% while maintaining OTIF above 90%.
What went wrong
- •Organic growth was a light 1.2%, driven by pockets of macro pressure, with about 40% of the portfolio in softer watch areas.
- •Consumer (CBG) organic sales were down 1% as the expected U.S. consumer market recovery did not materialize early in the quarter.
- •Transportation & Electronics (TBG) was flat, lighter than expected, due to weakness in consumer electronics (industry-wide memory chip issues) and auto, plus late timing of order intake.
- •Automotive was soft as expected, with global IHS build rates down about 3% overall and 10% in China pressuring volumes.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Organic sales growth | FY2026 | Approximately 3% | Approximately 3% (reiterated) | |
| Earnings per share | FY2026 | $8.50-$8.70 | $8.50-$8.70 (reiterated) | |
| Free cash flow conversion | FY2026 | Greater than 100% | Greater than 100% | |
| Free cash flow (absolute) | FY2026 | — | More than $4.5 billion | |
| Business Group margin expansion | FY2026 | — | Approximately 100 basis points | |
| Price for the year | FY2026 | About 80 basis points | Around 1.3 points (80 bps plus ~50 bps from oil-based increases) | |
| Organic growth | Q2 2026 | — | Higher than 3%, all three Business Groups accelerating |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Organic sales growth | 1.2% | Pockets of macro pressure; SIBG over 3% offset by flat TBG and CBG down 1%. |
| Adjusted operating margin | Up 30 bps to 23.8% | Strong volume and broad-based productivity more than offset ~$145 million of tariff impact, stranded costs and investments. |
| EPS | Up 14% (+$0.26) to $2.14 | Operational performance, lower share count, timing of tax benefit and FX offsetting tariffs and stranded costs. |
| Adjusted free cash flow | Up 10% to $540 million | Strong earnings growth and inventory improvement (three fewer days). |
| Safety & Industrial (SIBG) organic sales | Over 3% (3.2%) | Commercial excellence traction and new product launches across adhesives, safety, electrical and abrasives, offsetting roofing granules weakness. |
| Consumer (CBG) organic sales | Down 1% | USAC weakness from no early-quarter retail traffic pickup, partly offset by ~10% Scotch-Brite growth and China/Asia strength. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio shaping | Agreement to sell Precision Grinding & Finishing announced | Closed PG&F sale (reduced footprint by seven factories) and announced Madison Fire & Rescue acquisition (51/49 JV with Bain Capital) to create an $800 million high-single-digit-growth fire and safety business. | |
| Manufacturing footprint | Ended 2025 at ~108 factories | Brought projected site count below 100 via PG&F sale and closures; investing more than $250 million over three years in automation. | |
| Pricing / oil | About 80 basis points price for the year | Adding ~50 bps from oil-driven increases (~$125 million raw material cost increase) for total ~1.3 points; rollout started April in Asia, May in U.S. and Europe. | |
| Expanded Beam Optics (EBO) | Referenced as a growth opportunity | Validated by at least one hyperscaler with a second in testing; large Q1 order received; ramping with plans to double capacity toward year-end. | |
| Contingency in guidance | Not present | $0.05-$0.15 contingency kept for H2 given oil and macro volatility; update expected on the next earnings call. |
Q&A summary
Can you give perspective on the pre-buy size and how much additional price is embedded, and whether the backlog deltas give real visibility into Q2?
Hard to discern exact pre-buy size given the annual April 1 price increase plus a new oil-driven increase; orders accelerated from mid-single digits in Jan/Feb to well over double digits in March and into April. ~75% of revenue is book-and-ship, but the 20% YoY / 35% sequential backlog growth provides 400-500 bps of additional coverage, giving real confidence in Q2 acceleration.
Are customer inventories low with restocking, or balanced?
On Safety & Industrial, distribution inventory is relatively normal to maybe a tick below the typical 65-70 days. On consumer, it is about normalized around 13 weeks of supply (down from ~13.5 entering the year).
How do you think about the split of the $0.05-$0.15 contingency between demand and cost, and the oil exposure across the business?
The contingency spans both buckets. On oil, raw materials are ~45% of COGS and about a third of that ~$6 billion spend is petrochem-based; ~$125 million of cost increase is expected, offset by ~50 bps of price. Broader macro effects on consumer/auto are still unfolding.
Will growth accelerate each quarter even as H2 comps get tougher?
Yes, Q2 is expected to be better than Q1 and H2 better than H1; any pre-buy washes out in Q2, with H2 acceleration driven by core fundamentals in NPI and commercial excellence.
Why a JV structure for Madison, and is 2-3% actionable / 10% commodity-like still the right portfolio framing?
The 51/49 JV with Bain Capital is a strategic bolt-on in a priority vertical that strengthens the SCBA business, with Bain bringing post-merger integration and M&A expertise. About 10% of the business remains commodity-like and 2-3% is in flight (PG&F was part of that); shaping will continue and be sized for investors over time.