Please note that today's earnings release and slide presentation accompanying this call are posted on the homepage of our investor relations website at 3m.com. We delivered solid operating performance in Q1 with earnings per share of $2.14, up mid-teens versus last year. Operating margin increased 30 basis points to 23.8%, and free cash flow was over $500 million, up double digits. We had a light start to the year on the top line with organic growth of 1.2%, driven by pockets of macro pressure.
We saw encouraging order trends that support our outlook for acceleration in the balance of the year. Looking forward, we remain confident in achieving our full year 2026 guidance despite the volatile environment. To date, we've closed on approximately $80 million of new business against the three-year, $100 million target we laid out at Investor Day with a pipeline of $85 million of additional cross-sell opportunities. OEE improved over 100 basis points year-on-year as we optimize asset run length, runtime, and changeovers, creating a stronger foundation for sustained productivity and fixed cost leverage.
Cost of poor quality decreased by approximately 100 basis points versus Q1 last year, driven by more structured root cause analysis, significantly increased Kaizen activity, and tighter process controls. For example, transitioning from solvent to solvent-free coating, which brings cost, capital, and environmental benefits. When we automated the slitting operation at our Nevada facility late last year, we achieved a 30% increase in square yards per hour productivity. Over time, this transformation will allow us to accelerate towards a structurally higher growth, higher margin potential portfolio of priority verticals.
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth | FY2026 | Approximately 3% (reiterated) |
| Earnings per share | FY2026 | $8.50-$8.70 (reiterated) |
| Free cash flow conversion | FY2026 | Greater than 100% |
| Free cash flow (absolute) | FY2026 | More than $4.5 billion |
| Business Group margin expansion | FY2026 | Approximately 100 basis points |
| Price for the year | FY2026 | Around 1.3 points (80 bps plus ~50 bps from oil-based increases) |
| Organic growth | Q2 2026 | Higher than 3%, all three Business Groups accelerating |
| Metric | YoY | Note |
|---|---|---|
| Organic sales growth | 1.2% | Pockets of macro pressure; SIBG over 3% offset by flat TBG and CBG down 1%. |
| Adjusted operating margin | Up 30 bps to 23.8% | Strong volume and broad-based productivity more than offset ~$145 million of tariff impact, stranded costs and investments. |
| EPS | Up 14% (+$0.26) to $2.14 | Operational performance, lower share count, timing of tax benefit and FX offsetting tariffs and stranded costs. |
| Adjusted free cash flow | Up 10% to $540 million | Strong earnings growth and inventory improvement (three fewer days). |
| Safety & Industrial (SIBG) organic sales | Over 3% (3.2%) | Commercial excellence traction and new product launches across adhesives, safety, electrical and abrasives, offsetting roofing granules weakness. |
| Consumer (CBG) organic sales | Down 1% | USAC weakness from no early-quarter retail traffic pickup, partly offset by ~10% Scotch-Brite growth and China/Asia strength. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Portfolio shaping | Agreement to sell Precision Grinding & Finishing announced | Closed PG&F sale (reduced footprint by seven factories) and announced Madison Fire & Rescue acquisition (51/49 JV with Bain Capital) to create an $800 million high-single-digit-growth fire and safety business. | — |
| Manufacturing footprint | Ended 2025 at ~108 factories | Brought projected site count below 100 via PG&F sale and closures; investing more than $250 million over three years in automation. | — |
| Pricing / oil | About 80 basis points price for the year | Adding ~50 bps from oil-driven increases (~$125 million raw material cost increase) for total ~1.3 points; rollout started April in Asia, May in U.S. and Europe. | — |
| Expanded Beam Optics (EBO) | Referenced as a growth opportunity | Validated by at least one hyperscaler with a second in testing; large Q1 order received; ramping with plans to double capacity toward year-end. | — |
| Contingency in guidance | Not present | $0.05-$0.15 contingency kept for H2 given oil and macro volatility; update expected on the next earnings call. | — |