3M Provides 2011 Outlook - Analyst Blog

3M Company (MMM) has reaffirmed its earnings expectation for 2010 and declared its outlook for 2011. The company targets to achieve sales in the range of $29 billion to $30.5 billion in 2011, representing  a year-over-year organic growth of 5.5% to 7.5%. This includes positive currency effect of 1% to 2% and acquisitions related growth of 4% to 6%.

Earnings per share for 2011 are expected to be in the range of $5.90 to $6.10 per share. Increase in pension expense by $0.27 per share year over year is included in the earnings guidance. Without an increase in pension expense, earnings are expected to be in the range of $6.17 to $6.37 per share, representing a year-over-year increase of 10% to 14% on a GAAP basis.

For 2010, the company has maintained its earnings guidance range of $5.59 to $5.63 per share. Excluding the Medicare Part D-related charge recorded in the first quarter of 2010, earnings per share are expected to be in the range of $5.70 to $5.74.

The company continues to boost its R&D, sales and marketing investments and is building new manufacturing units, especially concentrating on developing economies. The third quarter 2010 results showed that the Asia-Pacific was the star performer amongst all geographic regions with a 28% sales increase. One-third of 3M's sales is derived from the developing economies and is expected to climb up to 45% by 2015, according to the company.

In the recent quarters, the company made a number of complementary acquisitions - Winterthur Technologies AG, Cogent Inc., Attenti Holdings S.A. and Arizant Inc.  - expanding its business growth opportunity in abrasives, security product and health care market. The company remains focused on making more such acquisitions, thus expanding its innovative expertise.

We believe that continued capital expenditure with new product launches should bolster its prospects across most end-markets. Strong cash flow position and continuously expanding sales provide 3M ample resources to expand through acquisition and innovation of new products.

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. Negative consumer sentiment is affecting the retail store traffic. On the corporate side, lower employment levels are negatively reducing the office supply purchases in most companies.

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, Safety, Security and Protection Services Business. Major competitors of 3M are Avery Dennison Corporation (AVY), EI DuPont de Nemours & Co. (DD) and Johnson & Johnson (JNJ).

We currently maintain our Neutral rating for the long term on 3M, with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

 
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