JP Morgan Comments On 3M's Solid Quarter

While 3M's MMM headline beat and raise looked positive versus low expectations, there were puts, TBDs, and takes from the 3M print that keeps JP Morgan from getting too excited. Positives include a Healthcare business that is holding in, and better industrial results, TBDs are Optical, and price/cost, while the negative is a below-consensus 2Q which makes the year, which was only raised by ~1%, more back-end loaded. Japan makes the results look better but half of the impact is macro-related, with which everyone is dealing, making this less of a differentiating factor. JP Morgan maintains Neutral as it doesn't see enough fundamental change to move off the sidelines. 1Q earnings beat JP Morgan's operating model by $0.06 with solid performances in I&T $0.03, D&G $0.03, and Healthcare $0.02 more than offsetting misses in C&O -$0.02 and SS&P -$0.01. Organic sales beat by 1%, but only one segment grew margins y/y as material costs and Japan impacts -$0.03 weighed. Management raised 2011 EPS guidance to $6.05-$6.25 and organic growth expectations to 6-7.5%. JP Morgan introduces its 2Q estimate of $1.50, implying more ground to cover through 2H11 to make guidance. Price/cost, Optical performance, and Japan still remain variables for the rest of the year. JP Morgan has a $96 PT and Neutral rating on 3M 3M is trading lower at $95.48