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After an encouraging end to 3M's (MMM +19%) former CEO Mike Roman's tenure last quarter, investors were hopeful the global conglomerate would continue its upward momentum under new leadership. 3M appointed William Brown as its CEO in March, officially stepping into the office on May 1. Mr. Brown took control of a leaner organization after 3M spun off its healthcare business in April, which trades under the name Solventum (SOLV).

Mr. Brown did what investors were hungry for in Q2, delivering another double-digit earnings beat on sustained organic growth. This led to 3M reiterating its FY24 organic sales growth outlook of flat to +2% yr/yr, while raising the low end of its adjusted EPS forecast, expecting $7.00-7.30 from $6.80-7.30. As a result, the stock is soaring today, reaching levels not seen in almost two years.

• With its healthcare business gone, 3M's reported sales figure is less important than its adjusted organic sales growth, which removes the impact of M&A. In Q2, organic revenue resembled that in Q1, expanding by 1.2% yr/yr. Adjusted EPS from continuing operations zoomed 39% higher to $1.93.
  • Streamlining operations has also included significant restructuring efforts, including shifting to a global business unit structure and centralizing global supply chains under one leader. These actions have already had a positive influence on 3M's immediate quarterly results, which is a promising development going forward.
• Growth in Q2 emanated from Electronics, mirroring the trends from Q1. 3M's Transportation & Electronics segment posted 3.3% organic growth in the quarter, with Electronics outperforming the market, boasting a low-double-digit jump organically, underscoring improving demand across the consumer electronics industry. Meanwhile, 3M's auto OEM business jumped nearly 5%, sustaining the positive momentum from last quarter. For the year's first half, 3M's auto OEM business climbed by 9% organically.
• While not as buoyant, Safety & Industrial also experienced organic growth, edging 1.1% higher yr/yr. Several end-markets pulled the segment higher, like adhesives and the automotive aftermarket. However, 3M noticed a low-single-digit decline in abrasives and industrial specialties. Management remarked that the end consumer remains cautious, echoing the sentiment of several of its peers exposed to the industrial sector.
• Relative strength across these two segments offset persistent weakness in Consumer, which endured a 1.4% organic sales decline in Q2, reflecting continuously weak discretionary spending. 3M anticipates the consumer retail environment to remain muted for the rest of the year.

There was plenty to like from the newly slimmed-down version of 3M in Q2. Despite operating in a wobbly global economy, organic revenue growth was solid across most of the company's end markets. Meanwhile, 3M continues to make inroads in its broad restructuring plans. There are still some clouds ahead, including uneasy end-market demand as well as a $10.3 bln settlement related to PFAS levels. However, we like the direction in which 3M is heading, especially after its early success under new leadership.