Wall Street Journal Feb.15, 2022: 3M Cuts Outlook as Variant Eases

P. B3 https://www.wsj.com/public/resources/documents/FnNgkvUETasCQhXn0IHU-WSJNewsPaper-2-15-2022.pdf

BY MATT GROSSMAN

The easing Covid19 pandemic is expected to reduce demand for medical masks this year, 3M Co. said, joining a group of companies that have forecast a decline in business from Covid-19 prevention. Masks became a billion-dollar business for the St. Paul, Minn., manufacturer starting in 2020, when the virus’s rapid spread sent consumers and healthcare workers looking to secure facial coverings to try to avoid infection. Now, as the latest U.S. surge caused by the Omicron variant fades, 3M said slowing mask sales will probably reduce its organic growth by about 2 percentage points this year.

That trend, 3M forecast Monday, will eat into its per-share profit by about 45 cents. Overall, 3M is projecting per-share earnings between $10.15 and $10.65 in 2022, a range roughly in line with Wall Street analysts’ forecasts, according to FactSet. After accounting for lower mask uptake, sales will grow by 2% to 5% organically this year, the company estimated.

Shares fell nearly 1% Monday as executives updated investors on 3M’s outlook in a virtual presentation. At $158.01, the stock is down roughly 12% over the past year.

Other companies that benefited from booming trade in Covid-19 protection have also seen demand for such products decline recently. Honeywell International Inc., another mask maker, said lower Covid-19 sales contributed to a 3% drop in companywide revenue in the three months through December. Fewer Covid-19-driven mask sales will also reduce Honeywell’s projected revenue by about a percentage point this year, the company forecast.

Canada Goose Holdings Inc., a Canadian luxury-apparel company that has made protective equipment during the pandemic, said such sales have fallen off considerably. The company’s miscellaneous revenue, which includes Covid-19-response sales, declined to $4 million in the last three months of 2021, from $13.8 million a year earlier.

The trend is reaching other industries as well, from vaccine makers to retail pharmacies. Pfizer Inc., which along with BioNTech SE makes the most widely used Covid-19 vaccine in the U.S., has said demand for the shots may wane as uptake plateaus. On the other hand, sales will likely strengthen for Paxlovid, an antiviral pill Pfizer developed to combat severe disease, Pfizer projected.

In turn, far fewer people are likely to come into CVS pharmacies for shots and Covid-19 tests this year, the chain’s parent company, CVS Health Corp., said last week. Vaccine volume will likely fall by 70% to 80% this year, and in-store Covid-19 testing will be down by 40% to 50%, CVS estimated.

Manufacturers such as 3M and Honeywell initially struggled to meet titanic growth in mask demand in 2020 as facial coverings rapidly became essential for everything from buying groceries to flying. As production expanded, supply has improved, with high-quality masks now widely available.

Overall, 3M has distributed about 4.3 billion respirators. Last year, 3M recorded $1.5 billion in sales from masks after notching $1.4 billion from such sales in 2020. In 2019, before the pandemic struck, 3M’s mask sales were $600 million.

Last month, the Centers for Disease Control and Prevention updated its guidance to suggest that more people should wear N95 masks and similar highquality versions, rather than simple cloth masks, to combat the spread of the more transmissible Omicron variant. The variant helped lift mask sales at the end of last year, with 3M posting $40 million in additional revenue from the product line.