Key takeaways
- 3M posted lower-than-expected revenue for the fourth quarter of 2022
- The company is cutting approximately 2,500 jobs
- 3M stock prices fell significantly after the report was published
3M published its fourth-quarter results in late January, revealing that it missed revenue expectations. Immediately after publication, stock prices fell significantly.
Within the report, plans for the future included slashing jobs and facing the uncertain economic climate head-on. Here are the specifics of the announcement, stock plunge and challenges 3M faces as it moves forward.
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What’s happening to 3M’s stock price?
Like many publicly traded companies, 3M’s stock has had a bumpy ride over the last year. Generally, the company’s stock price has been trending downward.
On January 24, 3M stock prices took a dramatic tumble in response to the fourth-quarter earnings report. The company’s share price fell from $124 on January 23rd to $114.78 on January 24th.
In the subsequent days, 3M’s share prices slumped even lower. As of January 26th, the company’s stock prices are sitting at $113.55. Without any change to the company’s plans, low investor confidence might continue to push prices lower.
Reasons behind the plunge
Stock prices are responsive to changing market conditions. When investors learn new information about a company, they respond with their dollars. Since investors didn’t like what they heard about 3M, it’s not surprising that stock prices took a tumble.
Here’s a closer look at what’s pushed 3M’s stock prices lower.
Fourth quarter revenue was lower than expected
3M's fourth-quarter report didn't make investors happy as the company posted lower-than-expected revenue for the fourth quarter. Since revenue is a key indicator of a company's financial health, many investors were spooked by the low numbers.
Economic headwinds
The theme of 3M’s report focused on challenges facing the economy. Within the report, CEO Mike Roman said, “In a year impacted by inflation, global conflicts and economic softening, our team took actions to position 3M for future success.”
He continued, “We managed our portfolio – including the divestiture of our Food Safety business, planned spin-off of our Health Care business and commitment to exit PFAS manufacturing by the end of 2025 – while continuing to work towards a mediated resolution for Combat Arms litigation. We invested in growth and productivity while following through on sustainability commitments.”
According to the report, the company expects more macroeconomic challenges throughout 2023. Most companies are facing a steep headwind due to a wide range of global issues as well as the continued pressure of inflation that is impacting both businesses and households.
3M’s plan to get back on track
When a company starts bringing in less revenue than expected, it’s usually a sign of changes to come. With that, it’s not surprising that 3M’s report included some plans to get the company back on track.
Job cuts
One of the most significant announcements in the report was the decision to cut around 2,500 jobs.
Roman said, “Our focus is executing the actions we initiated in 2022 and delivering the best performance for customers and shareholders. Based on what we see in our end markets, we will reduce approximately 2,500 global manufacturing roles – a necessary decision to align with adjusted production volumes."
While the specifics of the jobs to be cut weren’t announced, most will be within the manufacturing portion of the company. With sales slowing, cutting jobs might be what 3M needs to do to stay afloat in troubled economic times.
That said, it's unclear if job cuts will be enough to right the ship. Only time will tell if this cost-cutting measure will positively impact the company's future.
Changes to production
Late in 2022, 3M announced its decision to exit the per and poly-fluoroalkyl (PFAS) manufacturing arena. The plan is to stop this manufacturing process by the end of 2025.
Throughout 2023, the company is expected to start the process of ending this income stream. However, the company may spend significant time and resources shifting away from this type of manufacturing to find another source of long-term income.
How to invest in tumultuous economic times
If you’ve been watching the headlines, you’ve likely noticed a tidal wave of layoffs. Thousands of employees have been laid off, primarily within the tech sector.
No one likes to see layoffs. However, they aren't necessarily a terrible sign for investors. Instead, layoffs mean that the company is instituting cost-cutting measures to be better positioned to move through the challenging economic climate. When announcing layoffs, many CEOs cite difficult economic conditions as one reason for the personnel changes.
As an investor, staying up to date on the changing economic conditions can help you grow your portfolio. Unfortunately, staying on top of the market can take too much time and energy for anyone with a day job. Luckily, you can outsource the daily tracking of market conditions to an artificial intelligence-powered tool.
With the help of Q.ai, you can put artificial intelligence (AI) to work for you. After you add an Investment Kit to your portfolio, Q.ai will monitor the market. When changes occur, AI will make the necessary adjustments to keep your portfolio aligned with your investment goals and risk tolerance.
Q.ai offers Investment Kits for all sorts of investors. For example, investors concerned about inflation might find what they are looking for through the Inflation Kit. Taking advantage of specialized tools in this unpredictable economy can be the right move for your portfolio.
The bottom line
3M is the latest company to announce layoffs. The reality is that many major businesses have laid off thousands of employees in the last year. As the economy continues to shift around us, companies must adapt to stay afloat during concerning financial times.
Download Q.ai today for access to AI-powered investment strategies.
