Can 3M (MMM) Beat Q1 Earnings on Inorganic Growth? - Analyst Blog

The industrial goods manufacturer 3M CompanyMMM is scheduled to report its first-quarter 2015 results before the opening bell on Apr 23. In the last reported quarter, quarterly earnings beat the Zacks Consensus Estimate by a couple of cents. Let's see how things are shaping up for this announcement.

Key Factors in the First Quarter

During the soon-to-be-reported quarter, 3M completed the acquisition of Ivera Medical Corp., a manufacturer of healthcare products, to expand its horizons and unlock additional value in the healthcare division. Healthcare is one of the highest investment priorities for the company and in the past several years, it has made substantial investments to bolster the healthcare businesses. The acquisition is aligned with 3M's existing line of vascular access products. Ivera's I.V. port connector caps under the Curos Brand are used to disinfect devices used for access into the patient's bloodstream. With this acquisition, 3M aims to expand its offerings to hospitals and clinics and other locations to reduce infections.

3M also announced its decision to acquire Polypore International Inc.'s Separations Media business for $1 billion cash. The acquired business provides micro-porous membranes and modules for filtration in the life sciences, industrial and specialty segments. This acquisition is likely to expand 3M's existing core filtration platform in high-growth segments and strengthen its position in technology, manufacturing and branding.

The company expects to invest between $5 billion and $10 billion for acquisitions through 2017. 3M has been making efforts to reposition its portfolio by divesting assets that no longer fit its corporate strategy and indulge in investments which are more in tune with it.

Portfolio management, investment in innovation and business transformation are the three key levers on which the company intends to focus moving forward. 3M also aims to continue investing in capital expenditures and research and development to support organic growth as it aims at a capital structure strategy and increased capital deployment.

Earnings Whispers

Our proven model conclusively shows that 3M is likely to beat earnings this quarter as it possesses the key ingredients for a success recipe.

Zacks ESP: Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +0.52%. This indicates a likely earnings beat for the shares.

Zacks Rank: 3M's Zacks Rank #3 (Hold) when combined with positive ESP increases the predictive power of ESP. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Broadcom Corp. BRCM , earnings ESP of +5.00% and Zacks Rank #1.

Popular, Inc. BPOP , earnings ESP of +9.86% and Zacks Rank #1.

Huntington Ingalls Industries, Inc. HII , earnings ESP of +2.91% and Zacks Rank #1.

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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 Nasdaq, Inc.

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

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