Earnings Scorecard: 3M Company - Analyst Blog

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3M Company ( MMM ) posted encouraging results for the fourth quarter of fiscal 2011, with earnings growth of 5.5% year over year. Earnings per share beat the Zacks Consensus Estimate by 4 cents.

For full-year 2011, earnings per share increased by 5.9% year over year, outpacing the Zacks Consensus Estimate by 3 cents.

Fourth Quarter Highlights

Total revenue in the quarter increased by 3.3% year over year to $7.1 billion. Acquisitions contributed 2.3% to total growth, foreign exchange added 0.1%, organic volume growth 1.3% and higher year-on-year selling prices added 2.0%. Sales growth of 9.7% in Latin America/Canada was strongest in the quarter and US sales increased by 7.4%.

For 2011, total revenue was $29.6 billion, an increase of 11.1% year over year. Sales in the year were driven by growth in five out of six business segments of the company.

Sales in the quarter increased in all the company's segments, except Display and Graphics and Electro and Communication segments. Display and Graphics sales dropped 8.8% to $823 million , primarily due to declined sales of optical systems.

The Industrial and Transportation segment witnessed the highest growth of 14.3% amounting to $2.4 billion, resulting from double-digit sales growth of abrasives, aerospace, industrial adhesives and tapes, energy and advanced materials and automotive.

Operating income, for the quarter, was $1.36 billion compared with $1.31 billion in the prior-year quarter. Selling and general expense was $1.52 billion compared with $1.45 billion in the prior-year quarter and research and development expense was $379 million compared with $388 million in the prior-year comparable quarter.

Agreement of Analysts

Of the analysts covering the stock, one increased while two decreased their first quarter 2012 estimate in the last 7 days. While in the last 30 days, one each decreased and increased atheir estimate for the quarter. For the second quarter, three increased their estimate and one decreased the same. However, in the last 30 days, two analysts increased while one decreased their estimate for the quarter.

For fiscal 2012 also, three analysts have increased their estimate and one decreased, while in the last 30 days, only one analyst increased its estimate. For fiscal 2013, there was no upward revision witnessed in the last 7 or 30 days, while one each decreased its estimate in the last 7 or 30 days.

3M reaffirmed its full-year 2012 guidance, expecting organic sales growth of 2% - 5% and earnings per share in the range of $6.25 - $6.50. Operating income margins are expected to be between 21% - 22.5%.

The company expects to see a sluggish growth in the first half of 2012, as weakening economies continue to challenge business growth. Investments in research and development ("R&D"), sales and manufacturing are targeted by the company to achieve accelerated growth.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate for the upcoming first quarter increased from $1.53 to $1.51 and for the second quarter of 2012 remained stagnant at $1.64 in the last 7 days.

Again, the Zacks Consensus Estimate for fiscal 2012 increased from $6.29 to $6.31 and for fiscal 2013 decreased from $6.89 to $6.87.

Earnings Surprises

The fourth quarter earnings surprise for 3M was positive 4 cents or (3.05%). The surprise percentage over the last four quarters is indicative of a positive trend.

Summary

3M is globally recognized for its innovations, which are supported by some of its well-known brands, such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.

However, the company's growth objectives are largely dependent on timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to the market at acceptable price points. Further, the results have been impacted by worldwide economic and capital market conditions.

3M Company, together with its subsidiaries, operates as a diversified technology company with manufacturing operations spread over 60 countries worldwide. It has more than 35 business units organized into six segments: Consumer and Office, Display and Graphics, Electro and Communications, Healthcare, Industrial and Transportation, and Safety, Security and Protection Services Business. The major competitors of 3M are Avery Dennison Corporation ( AVY ), EI DuPont de Nemours & Co. ( DD ) and Johnson & Johnson ( JNJ ).

We continue to maintain a Neutral rating on 3M Company for the long term and a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.


 
AVERY DENNISON ( AVY ): Free Stock Analysis Report
 
DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report
 
JOHNSON & JOHNS ( JNJ ): Free Stock Analysis Report
 
3M CO ( MMM ): Free Stock Analysis Report
 
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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: AVY , DD , EI , JNJ , MMM

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