3M Reports Solid Results; Cuts Outlook
Industrial conglomerate and economic bellwether 3M Co. (NYSE: MMM – $151.24) reported better-than-expected second-quarter earnings, but tightened its full-year outlook to reflect lower-than-expected global economic growth. The company said it had net profit of $1.30 billion, or $2.02 a share, up from $1.27 billion, or $1.91 a share, in the year earlier period. Sales fell to $7.67 billion from $8.1 billion. The consensus was for of $2.00 per share and sales of $7.83 billion. The company said operating profit margins in the second quarter were 23.9%, up 1.1 percentage points from the already strong year- earlier level. Much of that improvement came from lower raw-material costs. Organic sales, excluding currency effects and recent acquisitions, grew just 1.8%, far below the company’s long-run target of 4% to 6%. Geographically, organic sales grew 4.1% in the U.S. and 17% in Mexico but were down 1% in Western Europe and 2% in China. 3M reported strong demand for water-purification filters and materials used in making airplanes, cars and roofing shingles. The manufacturer of everything from post-it notes to electronics and health care systems said it now expects full-year earnings to range from $7.80 to $ 8.00, compared with prior guidance of $7.80 to $8.10. Organic local-currency sales are expected to grow 2.5% to 4.0%, compared with prior guidance of 3% to 6%. The company is expecting the strong dollar to reduce 2015 sales by 6% to 7%. Full year 2015 earnings per share appear to be on target for $7.90 vs. $7.48 last year and the outlook for 2016 is closer to the $8.75 mark. These high-quality shares, yielding 2.6%, remain a solid holding in most conservative portfolios.