Investors applauded diversified products manufacturer and Dow-30 member 3M Company's (MMM – Free 3M Stock Report) third-quarter financial release this morning, and rightfully so, in our opinion. Indeed, the company announced better-than-expected across-the-board financial results, and upped both its top- and bottom-line guidance.
Specifically, share earnings easily surpassed expectations, coming in at $2.33, 8% higher than the year-earlier tally, and nearly triple the growth we were anticipating. Sales improved 6%, to $8.172 billion, well ahead of the consensus estimate and 3% higher than our call. Meanwhile, the operating margin appears to have remained on the upswing, highlighting management's ability to keep costs in check.
The company reported sales growth in each of its five business segments, despite divestitures and currency headwinds. Electronics and Energy posted the biggest sales gain (+10.6%), with strength in electronic-related sales, and abroad picking up the slack for softer domestic demand. Geographically, sales growth was strongest in the Asia/Pacific region, increasing 9.7%. For comparison purposes, overall sales growth was up 1% in the United States.
Further stoking investor confidence, management said that it now anticipates earnings of $9.00-$9.10 a share for the full year, well above its previous $8.80-$9.05 range. The company also raised its organic local-currency sales growth estimate to 4%-5%, from its prior 3%-5% outlook. Given the September-quarter outperformance and updated guidance, we've decided to up our 2017 share-net estimate by $0.15, to $9.10, and our sales call to $31.2 billion. This assumes 8% and 3% respective gains for the December quarter.
This stock has been on a good run since the start of the year, and has set a new high-water mark. Thus, 3- to 5-year price appreciation potential is nothing to get too excited about here. However, MMM holds investment appeal, especially for risk-averse accounts. Indeed, it is ranked 1 (Highest) for Safety and scores our top mark (100 out of 100) for Price Stability. Its dividend helps to sweeten the pot as does the company's healthy balance sheet and strong cash flow generation. Also, this equity would likely hold up better than most if the market was to cool off. We continue to urge buy-and-hold investors to buy on dips.
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 (19%); Healthcare (18%); Electronics & Energy (16%); and Consumer (15%).
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
