Shares of Dow component 3M tumbled Thursday after the manufacturing giant reported a lower-than-expected quarterly profit, cut its 2019 earnings forecast and announced plans to lay off 2,000 workers.
The job cuts, part of moves to restructure its businesses into four operating units from five, would result in an estimated annual pretax savings of $225 million to $250 million, with $100 million in the remainder of 2019, the company said.
Shares of 3M plunged more than 10%, sending the Dow Jones Industrial Average down nearly 1%. The stock was on pace for its worst day since Oct. 19, 1987, which was Black Monday when the Dow lost 22.61%.
Watch 3M CEO Mike Roman on CNBC’s “Mad Money” on Monday, April 29, at 6 p.m. ET
Here are the numbers 3M reported:
- Earnings per share: $2.23, adjusted vs. $2.49 expected in a Refinitiv survey of analysts
- Revenue: $7.863 billion vs. $8.025 billion expected in the survey
The first-quarter results were hurt by a litigation-related pretax charge of $548 million, or 72 cents per share. The company struggled with sales in key markets. Sales in Asia-Pacific, its biggest market outside the U.S., fell 7.4%, while sales in Europe, the Middle East and Africa declined 9.4%.
Scott Davis, chairman and CEO of Melius Research, said 3M’s performance has lagged far behind other industrials in the first quarter, and that the company’s results aren’t indicative of a larger problem with the economy.
“We have other companies that have shorter cycle businesses, too, and they have not seen this type of decline. I don’t think its broader than what we’re seeing, I think it’s fairly 3M specific,” he said in an interview on CNBC.
“The long-term reputation of this company is they’re slow to restructure, and when they do, it’s not enough.”
The company, whose diverse products include adhesive tapes and air filters, said it now expects 2019 adjusted earnings between $9.25 and $9.75 a share, down from its prior forecast of $10.45 to $10.90 per share.
“The first quarter was a disappointing start to the year for 3M,” CEO Mike Roman said in a statement. “We continued to face slowing conditions in key end markets which impacted both organic growth and margins, and our operational execution also fell short of the expectations we have for ourselves.”
“As a result, we have stepped up additional actions – including restructuring – to drive productivity, reduce costs, and increase cash flow as we manage through challenges in some of our end markets.”