(MMM) 3M Company Beats Earnings Estimates

3M Company (MMM) announced first-quarter 2012 results before the market opened today, reporting earnings per share of $1.59, above the Zacks Consensus Estimate of $1.48 per share. Earnings per share surged 6.7% year over year.

The company achieved record sales during the first quarter.

Total Revenue

Total revenue in the quarter inched up 2.4% year over year to $7.5 billion. Acquisitions contributed 1.5% to total growth, and foreign exchange reduced sales by 0.9%. Sales growth of 8.4% in Latin America/Canada was strongest in the quarter. US sales increased by 6.3%, was up 0.1% in Europe and declined by 1.9% in Asia-Pacific.

Segment Results

Sales increased in all segments of the company, except Display and Graphics and Electro and Communication segments. Display and Graphics sales declined by 11.8% to $832 million, primarily due to declined sales of optical systems. Electro and Communication revenue was $808 million, down 3.4%, primarily due to declined sales of consumer electronics.

The Industrial and Transportation segment witnessed the highest growth of 8.6%, amounting to $2.7 billion, led by double-digit sales growth of abrasives, aerospace and automotive OEM.

Safety, Security and Protection Services revenue increased by 5.5% to $1.0 bllion, led by sales increase in roofing granules and personal safety business, partially offset by a decline in security systems sales. Consumer and Office revenue was $1.0 billion, up 4.3% attributable to double-digit growth in DIY business. Healthcare sales increased by 2.0% to $1.3 billion, helped by increased health information systems sales, partially offset by sales decline in drug delivery business.

Income and Expenses    

Operating income, for the quarter, was $1.63 billion compared with $1.58 billion in the prior-year quarter. Selling and general expense was $1.55 billion compared with $1.53 billion in the prior-year quarter and research and development expense was $411 million compared with $398 million in the prior-year comparable quarter.

Balance Sheet

Cash and Cash equivalents were $2.33 billion at the end of the year with long-term debt of $4.5 billion and shareholders equity of $16.62 billion.

Outlook

3M upgraded its full-year 2012 earnings guidance to $6.35 – $6.50 from its prior expectation of $6.25 – $6.50. Organic sales growth is expected to be in the range of 2% – 5%. Operating income margins are expected to be between 21% – 22.5%.

The company believes it will continue to post good results despite the prevailing weak economies, which are challenging business growth. Investments in research and development (“R&D”), as well as sales and manufacturing are targeted by the company to achieve accelerated growth.

3M is globally recognized for its innovations, which are supported by some of its well-known brands, such as Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard. We believe that continued capital expenditure with new product launches should bolster its prospects across most end-markets.

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.

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

We continue to maintain a Neutral rating on 3M Company for the long term and a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.

AVERY DENNISON (AVY): Free Stock Analysis Report

DU PONT (EI) DE (DD): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

3M CO (MMM): Free Stock Analysis Report

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