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3M Misses Despite Record Revs - Analyst Blog

By: Zacks.com
Posted: 4/25/2013 11:08:00 AM
Referenced Stocks: CR;HON;MIC;MMM

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.

Outlook

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).



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