Diversified manufacturing giant 3M Company (MMM - Free 3M Stock Report) got off to a good start in 2017. The Dow-30 company reported share earnings of $2.16, which was up 5.3%, year over year, and surpassed our expectation of $2.08. The biggest surprise, though, was a better-than-expected top-line performance. Indeed, the company posted sales of $7.685 billion, which represented a nearly 4% year-to-year increase and exceeded both our forecast ($7.475 billion) and the meager 0.4% advance recorded in the final quarter of 2016. Note: The sales figure includes the impact of foreign currency translation and recent divestitures.
The first-quarter top-line performance was driven by solid performances across nearly all of 3M's operating segments. The Industrial unit, the company's largest segment, posted sales of $2.7 billion (up 4.2%), driven by strong sales of automotive and aerospace solutions, advance materials, abrasives, industrial adhesives and tapes, and automotive aftermarket products. The industrial segment was followed by respective sales advances of 3.4%, 2.3%, and 11.1% for the Safety and Graphics, Health Care, and Electronics and Energy segments. The Consumer division, the company's smallest segment, was the only detractor to the top line, with sales falling 0.7% in the first quarter.
The diversified manufacturer also noted that its recent investments across the business to boost growth and improve productivity are starting to deliver tangible results. In the March quarter, strategic investments in growth, productivity, and portfolio actions added $136 million to the company's operating income of $1.8 billion. Looking forward, 3M Company expects these initiatives to continue to support both sales and earnings.
Meantime, the company is putting its strong cash flow generation to use, with a continued eye on enhancing shareholder value. 3M Company increased its dividend for the 59th-consecutive year and remains very active on the share-repurchase front. The strong cash flow and ample cash on hand (nearly $2.2 billion at the end of the March period) also gives it the flexibility to remain active on the acquisition front. And on point, 3M Company recently agreed to purchase Scott Safety, which should bolster the company's already strong position in the personal safety market.
Adding all these aforementioned factors up, it was a very good start to the year for the Dow-30 company, with more good news likely to come in the remaining quarters. Management has upped its full-year organic sales guidance to 2% to 5%, from its previous range of 1%-3%, and now expects earnings of between $8.70 and $9.05 a share; its prior bottom-line bracket was $8.45 to $8.80. We have followed suit and now look for earnings of $8.90 a share, on sales of nearly $31 billion. Our previous estimates were for earnings of $8.65 a share, on sales of $30.45 billion.
The investment community seemed to like the better-than-expected start to 2017 and the company's rosier outlook for the full year, bidding 3M Company shares higher in pre-market trading. However, the stock is now little changed as trading kicks off. The investment thesis has not changed here, as we continue to think this high-quality industrial stock would make an excellent addition to just about any portfolio, especially those stressing safety and income. That said, the continued ascent in 3M Company shares, including today's move higher, does discount a good deal of the growth we envision to 2020-2022.
About the Company: 3M, a component of the Dow Jones Industrial Average, is a diversified manufacturer that sells more than 50,000 products in more than 70 countries. Its five business segments include: Industrial (34% of 2016 sales); Safety & Graphics (18%); Healthcare (18%); Electronics & Energy (17%); and Consumer (15%).
