(MMM) 3M Company Tops Earnings Estimates

January 29th, 2010

3M Company (MMM) reported earnings from continuing operations of $1.30 for the fourth quarter of 2009, beating the Zacks Consensus Estimate. Revenues for the quarter were $6.1 billion.

Revenues increased over 11% year on year and the growth was very broad based. Every geographic region expanded the sales with notable performances in Asia Pacific at 22% and Latin America and Canada each at 19%. The company experienced double digit sales increases in nearly all business segments led by displaying graphics at 19% and safety security and protection at 13.5%. Organic volumes grew 4.4% in the fourth quarter driven by strong demand for optical films and respiratory protection products.

Organic volumes rose nearly 19% in Asia Pacific. As Korea, China and Taiwan posted the most dramatic increases driven by a combination of improved local demand along with the pick up in global electronics. Selling prices rose 1.1%, so the company effectively held on to price increases enacted a year ago.

Gross profit improved 18% year-on-year and gross margins show an improvement by almost three whole points to 47.9%. Factory utilization accounted for half of the improvement with fourth quarter improvement. SG&A costs increased 7%, driven by a higher advertising and merchandising investment along with higher compensation costs related to improved year-on-year company performance. As a percent of sales SG&A declined by 60 basis points. R&D spending was down just slightly versus the fourth quarter last year, impacted by company-wide cost reduction efforts.

Operating income rose 38% to $1.3 billion. And operating margins were 21.9%. The fourth quarter tax rate was 26.8%, down 80 basis points versus Q4 last year; due to a lower international tax rate and a completion of certain tax audits.

Finally in the midst of the weak economic climate, the company invested $1.3 billion in R&D, up slightly as percent of sales. 3M Company continues to support its key larger programs but overall spending was impacted by company-wide cost initiatives such as in direct spending reduction and obligation policy change.

Free cash flow conversion was 82% in the quarter, impacted by discretionary pension contributions of more than $400 million in the fourth quarter. Its global pension plans at year end were 90% funded with the U.S. qualified plan at 96% and international plans at 83%.

Inventories declined by $374 million and inventory turns improved from 3.8 to 4.6 for the year. Capital expenditures for the year came in at $903 million. The company expects 2010 capital expenditure to be approximately $1 billion. The strong capital discipline resulted in net debt of $1.1 billion, down $3 billion from one year ago. Cash and marketable securities increased by $2 billion and debt got actually reduced by $1 billion.

The company is working on an improved planning frame for 2010 with an EPS of $4.90 to $5.10 which is an increase over 2009.

3M Company operates as a diversified technology company worldwide. It operates in six segments: Industrial and Transportation; Health Care; Safety, Security and Protection Services; Consumer and Office; Display and Graphics; and Electro and Communications. Major competitors are DuPont (DD) and Johnson & Johnson (JNJ).

We currently have an Outperform recommendation on MMM.

Zacks Investment Research

Stock Blog Hub

(MMM) 3M Company Tops Earnings Estimates

Author

Keyword Topics

Stock Blog Hub

(MMM) 3M Company Tops Earnings Estimates

Author

Keyword Topics

Tag Cloud

Share This Post