(Bloomberg) -- 3M Co. shares sank after it forecast 2024 profits and sales growth that fell short of estimates, disappointing Wall Street after a major restructuring push had lifted results last year. 

Adjusted earnings will be no more than $9.75 per share this year, compared with the $9.81 average of analyst estimates compiled by Bloomberg. Organic sales are expected to be flat to up 2%; analysts had expected the figure to grow by 2.7%. 

3M dropped by 10% to $97.18 as of 10:07 a.m. New York time, the biggest intraday decline since March 2020.

3M began slashing thousands of jobs as part of the largest restructuring push in its history that helped lift profit margins and cash generation in the second half of 2023. Yet broader economic environment remains muted for the maker of Post-it notes, touch screen display materials and health care products, Chief Executive Officer Mike Roman said.

“While we have more work to do, our actions are helping us improve our operational performance and create a more competitive 3M,” Roman said during a conference call with analysts. 

The cautious outlook was announced as 3M reported fourth-quarter adjusted quarterly earnings that were well above Wall Street estimates, helped by the restructuring push.

Adjusted earnings were $2.42 per share in the fourth quarter, better than the $2.31 analysts predicted. The company’s adjusted operating margin of 20.9% came in just shy of Wall Street’s expectation for 21.2%.

3M’s forecast “reflects some conservatism given still uncertain end market dynamics and could position the company to deliver on its outlook, supporting stock appreciation over time,” Citi analyst Andrew Kaplowitz said in a client note.

The company said the spinoff of its health-care unit is still on track to be completed in the first half of this year. 

Although slumping electronics markets are stabilizing, industrial demand is mixed, retail spending remains slow and China continues to be soft, Roman said.

“We’re not seeing meaningful changes in the end markets as we start 2024,” he said in an interview.

In addition, a higher tax rate and other expenses represented a 29-cent headwind to the company’s full-year earnings forecast, 3M President Monish Patolawala said in an interview. 

Sales growth will also be affected as the company discontinues some products with less attractive growth and margin prospects, Patolawala said. That and other factors amount to about a percentage point of organic growth, he said.

Restructuring Aftermath

3M last year launched a sweeping restructuring push including thousands of job cuts to become more streamlined as it confronted sluggish sales and made progress tackling huge legal liabilities that have put many investors on the sidelines.

Shares of the St. Paul, Minnesota-based manufacturing giant had declined 12% over the 12 months ending with Monday’s close, well behind the 21% gain notched by the S&P 500 Index in the same period.

The company last year agreed to pay as much as $12.5 billion to resolve claims by drinking water utilities that so-called forever chemicals produced by 3M tainted water supplies across much of the US. Other sources of liability from 3M’s legacy producing the substances remain unresolved. 3M also agreed to pay $6 billion to settle hundreds of thousands of lawsuits alleging it supplied defective earplugs to US combat troops.

The cost of funding those payouts have raised questions about whether it will need to dial back its practice of paying out rich dividends compared with other industrial companies.

3M expects to generate as much as $7.1 billion in adjusted operating cash flow in 2024. Prioritizing cash generation and wider profit margins amid lackluster demand will continue to be key priorities for the company, Roman said.

“We’re coming off a year where we came out stronger, leaner, more focused,” he said. “We’re going to continue to build on that momentum.”

This story was produced with the assistance of Bloomberg Automation.

(Updates with shares, comment from CEO and analyst from first paragraph)

©2024 Bloomberg L.P.