3M Beats by a Penny - Analyst Blog

3M Co. (MMM) released its earnings results for fourth quarter of 2010, reporting earnings per share of $1.28, beating the Zacks Consensus Estimate of $1.27. The company's organic revenues improved in all of its six businesses.

Revenue

Total revenues for the quarter increased by 9.6% year over year to $6.7 billion. Organic sales volumes increased in all six of 3M's businesses, led by a 19.8% increase in the Electro and Communications business and a 14.7% increase in Display and Graphics. In terms of regions, organic volume growth was strongest in Asia-Pacific at 18.1% and Latin America at 12.2%.

Organic volumes grew 8.6% while acquisitions added 1.8% to sales, foreign exchange reduced sales by 0.5% and selling prices reduced sales by 0.3% year-over-year.

Operating margins were 19.4% compared to 21.9% in the fourth quarter of 2009. Net income was $928 million, or $1.28 per share, compared to $935 million, or $1.30 per share, in the corresponding prior -year  period.

Balance Sheet

The company continues to maintain a sustainable free cash flow position. Cash and equivalents stood at $4.4 billion with long-term debt at $4.1 billion and shareowners' equity at $16 billion.

Outlook

The company expects double-digit sales growth in 2011, with organic sales volume growing 5.5% to 7.5%. 3M increased its 2011 earnings estimate to a range of $5.95 to $6.20 per share compared to a prior range of $5.90 to $6.10.

The company's strong results and continued outperformance in emerging markets like China, India, etc. strengthens our conviction that 3M Co. will deliver stronger results ahead. We believe that continued capital expenditure with new product launches should bolster its prospects across most end-markets.

The 3M brand is recognized and trusted around the world. Household names like Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard are market leaders. This has led to household recognition of its brands across the globe.

However, results have been impacted by worldwide economic and capital market conditions. Negative consumer sentiment is impacting retail store traffic. On the corporate side, lower employment levels are negatively reducing office supply purchases in most companies.

El DuPont (DD) is a major competitor.

We currently have a Neutral recommendation on 3M Company.

 
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