Conservative · Stocks to Consider and Updates

3M Reports Fourth Quarter Results; Lowers Guidance

Manufacturing conglomerate 3M Co. (NYSE: MMM – $198.28) posted fourth quarter adjusted earnings of $2.31 per share, up from $2.10 in the same period a year ago and exceeding the $2.28 estimate from analysts. Total revenue of $7.95 billion, however, was down from $7.99 billion in the same period a year ago but also topped the Street projection of $7.87 billion. By business segment:

  • Industrial sales increased 2.5% but were down 0.3% adjusted for currency fluctuations. Sales grew in all geographical regions led by the U.S., Canada and Latin America. Sales grew in advanced materials, industrial adhesives and tapes, separation and purification, abrasive systems and automotive aftermarket.
  • Safety and Graphics grew sales 0.3% and 3.3% excluding currency headwinds. Sales grew in personal safety and commercial solutions and declined in transportation safety and roofing granules.
  • Health Care unit sales were higher by 2.4% (4.8% organic) thanks in part to food safety, health information systems and oral care offsetting declines in drug delivery.
  • Electronics and Energy sales of $1.3 billion were down 4.5% in U.S. dollars. Organic local-currency sales increased 4.1% and foreign currency translation decreased sales by 1.5% and divestitures decreased sales by 7.1%. Electronics-related sales grew 3% with growth in both electronics material solutions and display materials and systems. Energy-related sales increased 5%.
  • Consumer sales of $1.2 billion were up 0.1 percent in U.S. dollars. Organic local-currency sales increased 1.9% and foreign currency translation decreased sales by 1.8%. Sales grew in home improvement and stationery and office supplies but declined in home and consumer health care. Sales were strongest in Latin America/Canada and the U.S. offsetting declines in the Asia-Pacific and European regions. 

       Management lowered its full-year 2019 earnings guidance to a range of $10.45 to $10.90 per share from a prior range of $10.60 to $11.05 and compared to 2018’s $10.46 per share. The new guidance straddles the Street projection of $10.75. The company widened its full-year organic local currency growth expectation to a range of 1% to 4% versus 2% to 4% previously. The long-term picture for MMM on a risk-adjusted basis remains sound, especially when the company’s well-covered $5.44 annual dividend is factored in. Strong cash flow generation should aid in further acquisition activity, too.

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