Diversified manufacturer 3M Co. warned Friday that its results would miss expectations because of weaker-than-expected demand for optical film used in flat-screen monitors and TVs, sending its shares down 9%.
Companies from manufacturers to retailers had expected a burst of orders for higher-end flat-panel televisions ahead of the World Cup soccer games, but 3M said demand did not meet those hopes.
The warning was the latest sign of trouble in the liquid crystal display marketplace and pulled down the shares of other players, including Corning Inc. and LG.Philips LCD Co.
3M, also known for its Scotch tape and Post-it notes, said it expected to report second-quarter sales of about $5.7 billion. Analysts had expected the company to report sales of $5.72 billion, according to Reuters Estimates.
The company expects to earn $1.14 to $1.17 a share in the second quarter, including a gain of 8 cents to 10 cents a share from a one-time income tax adjustment.
For the year, 3M said it expected to earn $4.55 to $4.65 a share.
On average, analysts expected the company to report per-share earnings of $1.17 for the quarter and $4.67 for the year. Analysts' estimates did not include the one-time gain, according to Reuters Estimates.
3M said its earnings and revenue projections were a function of lower-than-expected sales in its display and graphics business segment, which makes optical films used in LCD displays.
The company said the whole electronics industry had "overestimated demand for LCD televisions in anticipation of the FIFA World Cup." That resulted in rising inventory levels, especially for desktop monitors, 3M said, and had "significantly impacted" sales of its optical films.
3M said the marketwide weakness in demand was exacerbated internally by higher-than-expected costs as the company ramped up production of the film.
Shares of the St. Paul, Minn.-based company fell $7.29, to $74.10. The 9% drop was the biggest one-day percentage loss since Dec. 17, 1997, when 3M fell 9.6% after a profit warning.
C. Stephen Tusa, an analyst at JPMorgan who raised his recommendation on 3M one day before the company's warning, called the sell-off "overdone" and said the stock was now trading close to its historical lows of 16 times earnings.