Shares of 3M (MMM) are in focus in afternoon trading after the company forecast fiscal 2016 earnings at the lower end of its previous guidance. The company also issued guidance for fiscal 2017 at its annual outlook meeting in New York City.

2016 EPS SEEN AT LOW END OF VIEW: At its 2017 Financial Outlook meeting, 3M said it now expects FY16 earnings per share to fall at the low end of its previously provided $8.15-$8.20 guidance. Analysts currently expect 3M to report FY16 EPS of $8.17. In October, 3M cut the high end of its FY16 EPS view to $8.15-$8.20 from $8.15-$8.30. This morning, 3M said it expects "strong" free cash flow and return on invested capital in FY16 as well as U.S. dollar strength creating a non-operational headwind. Additionally, 3M expects "positive" organic growth in the fourth quarter, and said full-year is trending "to approximately flat." 

2017 OUTLOOK: 3M also provided its outlook for fiscal 2017, forecasting EPS of $8.45-$8.80, compared to the consensus expectation of $8.64. Organic local-currency sales growth is expected in the range of 1%-3%, while free cash flow conversion is estimated at 9%-105% for FY17, which assumes operating cash flow of $6.1B-$7.1B, the company said. 3M added that it plans to invest roughly $1.8B in research and development in 2017 to support organic growth and "enhance the company's strong margins and return on invested capital." 

BUSINESS TRANSFORMATION UPDATE: At the annual outlook meeting, 3M also discussed its Business Transformation lever, which is "already creating value for the company and its customers." The company said it expects this initiative to deliver $500M-$700M in annual operational savings by 2020, as well as an additional $500M reduction in working capital. In presentation slides, 3M said that the initiative will lead to increased front-end capacity and agility and will further enhance productivity through standardizing global processes and optimizing the company's supply chain.

STREET RESEARCH: JPMorgan analyst C. Stephen Tusa Jr. said that 3M's FY17 guidance update is "a bit better" than the firm's below-consensus estimate, despite the company's Q4 expectations tweaked to the low end. The analyst noted that sentiment "seemed mostly negative" heading into the meeting and said he expects a "modestly" positive reaction. Tusa Jr. added that while a modestly positive guidance against a mostly negative sentiment should lend support, he doesn't see enough here to change the narrative around the debate at 3M to drive upside in shares. The analyst maintained a Neutral rating on the stock.

PRICE ACTION: In afternoon trading, 3M is down 0.66% to $178.45. Year-to-date, shares are up over 18%.