Shares of industrial conglomerate 3M Co. (NYSE: MMM – $200.72) are falling about 7% in early trading, despite meeting Wall Street sales and earning’s estimates. Sales were up 7.7% (2.8% in local currency) to $8.3 billion for the first quarter thanks to a strong showing in the company’s Safety and Graphics unit. Total sales grew 15% in Safety and Graphics; 7.1% in both the Industrial and in Health Care segments; 5% in Consumer; and 4.6% in Electronics and Energy. On a geographic basis, total sales grew 13.7% in Europe, Middle East and Africa; 10% in Asia-Pacific; 4.3% in Latin America/Canada; and 3.5% in the U.S. Excluding special items, earnings were $2.50 per share, an increase of 15.7% year-on-year and in line with consensus.
3M, however, lowered the high-end of its full-year earning’s guidance to $10.20 to $10.55 per share versus an earlier expectation of $10.20 to $10.70 per share. The recent pullback in price appears overblown. At current levels the shares present a possible buying opportunity for conservative long-term investors, as I believe MMM offers worthwhile 3- to 5-year total return potential, especially when viewed on a risk-adjusted basis. The company’s strong cash flow generation ought to remain positive for years to come and the dividend, currently yielding 2.7%, is likely to rise over the next twelve months along with additional share repurchases.