3M Misses Despite Record Revs - Analyst Blog


Diversified conglomerate 3M Company ( MMM ) reported stellar first quarter 2013 results with an all-time high record first quarter net sales of $7.6 billion compared to $7.5 billion in the year-ago quarter. The superior performance was attributable to a healthy organic local-currency sales growth of 2.1% and inorganic growth of 1.7%.

The record quarterly sales were also led by improved performance by almost all the segments, except Electronics and Energy segment, which reported a negative top-line growth. The company reported solid organic local-currency sales growth across all geographic regions, except EMEA (Europe, Middle East and Africa). However, total revenues for the reported quarter missed the Zacks Consensus Estimate of $7.8 billion

Net income for the reported quarter was $1.1 billion or $1.61 per share compared to $1.1 billion or $1.59 in the year-earlier quarter. Despite a decent year-over-year increase on a per share basis, the reported earnings missed the Zacks Consensus Estimate by 4 cents. Operating income for first quarter 2013 was $1.6 billion, while operating margin was 21.6%.

Segment Results

Industrial segment sales increased 4.6% year over year in U.S. dollars to $2.7 billion driven by a spurt in sales in Latin America/Canada, the U.S. and Asia Pacific. Organic local-currency sales increased 2.9% year over year due to strong sales in aerospace, industrial adhesives and tapes, personal care and liquid filtration.  

Health Care segment sales climbed 2.8% in U.S. dollars to $1.3 billion, aided by positive growth in all major geographic regions. Organic local-currency sales increased 4.0% year over year with a healthy growth across all business lines, the strongest being food safety, health information systems, critical and chronic care.

Consumer segment revenue was $1.1 billion, up 2.0% year over year in U.S. dollars as sales increased in all major geographic regions except EMEA. Organic local-currency sales growth of 3.7% was attributable to consumer health care, DIY and home care business.

Safety and Graphics segment sales rose 2.2% year over year in U.S. dollars to $1.4 billion with a strong performance in Asia Pacific, Latin America/Canada and the U.S. Organic local-currency sales growth of 2.3% benefited from architectural markets, building and commercial services and personal safety.

Electronics and Energy segment revenue was $1.3 billion, down 3.3% in U.S. dollars as sales dipped in EMEA, the U.S. and Asia Pacific. Organic local-currency sales decreased 2.2% as industry demand remained soft overall due to continued challenging macroeconomic environment.

Balance Sheet and Cash Flow

Cash and cash equivalents at quarter-end were $2.9 billion compared to $2.3 billion in the year-ago period. Long-term debt at quarter-end increased to $4.9 billion from $4.5 billion in the previous year. Free cash flow for the three-month period increased to $670 million from $567 million in the prior-year period.

During the reported quarter, 3M paid $440 million in cash dividends and repurchased $805 million worth of shares. Over the years, 3M has consistently returned significant cash to its shareholders through dividends and share repurchases.


With continued softness in some end-markets, 3M revised its earlier guidance for full year 2013 from $6.70 to $6.95 per share to $6.60 to $6.85 with an organic local-currency sales growth of 2%-5%. We also remain encouraged by the record top-line growth of the company and expect it to continue its bull run in the coming quarters.

3M currently has a Zacks Rank #3 (Hold). Other notable players in the industry include Crane Co. ( CR ), Honeywell International Inc. ( HON ) and Macquarie Infrastructure Company LLC ( MIC ), each carrying a Zacks Rank #2 (Buy).

CRANE CO (CR): Free Stock Analysis Report

HONEYWELL INTL (HON): Free Stock Analysis Report

MACQUARIE INFRA (MIC): Free Stock Analysis Report

3M CO (MMM): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CR , HON , MIC , MMM



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