3M Q2 earnings on deck: What to expect

3M (MMM) is set to announce its second-quarter earnings on Tuesday, and investors will be watching demand for artificial intelligence infrastructure buildouts, as well as softness in the company’s consumer electronics and auto businesses.

Wall Street expects the maker of Post-it Notes, Scotch tape, and Command strips to post EPS of $2.25, implying a 4.2% increase, while revenue is seen rising 3.2% to $6.4B.

Chief Executive Bill Brown, speaking at a Wells Fargo industrials conference in June, highlighted that the company's electrical markets business generates roughly $500M annually from products used to bring power to data centers, including medium-voltage cables, splices, and insulation systems. Demand remains strong enough that production capacity, rather than customer demand, is becoming the limiting factor.

Inside the data center, Brown said a separate business tied to optical connectivity products is growing more than 50% annually from a base of roughly $100M. He also noted that cross-selling initiatives are running ahead of internal targets.

J.P. Morgan upgraded 3M to Overweight from Neutral with a price target of $180, pointing to growth that is taking hold and that the company needs to drive the next leg of earnings growth, with short-cycle indicators remaining supportive and AI/data center-driven demand broadening throughout the economy.

JPM analyst Chigusa Katoku said, “Softness in 3M's (MMM) consumer electronics and auto businesses is offset by strength in data centers and semiconductors, and 3M's efforts to gain penetration in mainstream markets are taking hold, while the U.S. consumer has been resilient.”

Seeking Alpha’s Quant Rating and Wall Street analysts are bullish, rating MMM a Buy. However, Seeking Alpha analysts are cautious, rating it a Hold.

Seeking Alpha analyst Envision Research noted that the company's operational turnaround supports continued EPS recovery, with a tangible margin boost and promising product launches. However, MMM's limited exposure to AI-related markets and ongoing legal issues pose significant downside risks.

Shares of 3M have gained nearly 1% year to date, underperforming the benchmark S&P 500, which has gained over 9% over the same period.

Over the last two years, MMM has beaten EPS estimates 100% of the time and has beaten revenue estimates 50% of the time.

Over the last three months, EPS estimates have seen three upward revisions, compared to four downward revisions, while revenue estimates have seen four upward revisions compared with three downward revisions.