The “Post-It Note” Company Just Stuck Its Largest Gain in 44 Years (23% in One Day)

While everyone was glued to big tech earnings, 3M—yeah, the Post-it note and mask folks—just had its biggest stock surge since 1980. Turns out a new competent CEO with fresh ideas can get investors optimistic again. (You should take notes, Cracker Barrel.)

Bill Brown, who took over as CEO on May 1, didn’t waste any time making his mark on the long-time dividend aristocrat company. In his first earnings report, he faced the music, addressing the company’s challenges head-on. After getting beaten down and seeing their stock drop 12% over the last five years, 3M needed to make some serious changes. Brown's top priority? Speeding up new product development to give their lineup a much-needed makeover.

(Source: Bill Brown LinkedIn)

“There’s a lot of value in our raw materials,” Brown said during the earnings call, encouraging his team to rethink their approach. This message resonated with shareholders, who had seen 3M’s market value drop by over $60 billion under the previous CEO, Mike Roman. By the end of Friday, 3M’s shares had jumped 23%, marking the biggest one-day gain since 1980.

During the earnings call, Brown confessed that 3M had lost its “aura” as the teenagers would call it, with new product revenue shrinking as they got sidetracked by ditching "forever chemicals" and untangling their supply chain. Even with all the hype around electric cars and semiconductors, these new efforts haven’t covered up the already existing problems. As Brown put it, "Our products are aging."

In an interview, Brown promised to tackle the company's money-wasting inefficiencies. He highlighted that a Command adhesive strip (you know, those things your mom uses for Christmas decorations) takes a scenic route through five factories and two distribution centers before reaching the customer. If I didn’t know any better, I would think 3M is being ran by the Government. But Brown’s speech has Wall Street and retail investors convinced he’s going to fix this ASAP. I can just picture it like that scene from The Office when Michael Scott gave shareholders a plan to fix the company.

On top of everything else, 3M is now on the lookout for a new CFO after Monish Patolawala decided to head over to Archer-Daniels-Midland Co. Brown mentioned a surprising tidbit: 80% of 3M’s raw materials come from just a handful of suppliers. For a company that produces over 60,000 different products, that’s frightening and just downright incompetent. You’d think they would’ve learned a thing or two from the pandemic right especially if they’re the ones supplying all the masks.

Of course, fixing these problems isn’t going to be a walk in the park. Even after forking over $10 billion to clean up drinking water supplies, 3M still has billions more in potential liabilities for those infamous “forever chemicals” they’re phasing out by 2025. 

Remember when news broke about 3M executives convincing a scientist that the forever chemicals she found in human blood were no big deal? Yeah, that’s still haunting them. Analysts estimate there are around $10 billion in unresolved PFAS liabilities, though that’s a bit less than earlier doom-and-gloom predictions.

Despite these challenges, 3M’s second-quarter results were a pleasant surprise, with organic sales growing for the first time in four quarters. With shares soaring nearly 23% to $127.16 after the earnings report, 3M is starting to look like it’s back in the game. One analyst nailed it, saying, “Bill has the guts to call out the problems, and you can’t fix what you don’t admit.” It seems 3M is finally turning the corner. Here’s to hoping this new direction sticks better than the fresh Post-It Note I just stuck on the fridge yesterday.

Stock.News does not have positions in companies mentioned.