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3M (MMM) Beats Both Q1 Earnings & Revenues, 2017 View Up

Despite a challenging macroeconomic environment, 3M Company MMM started 2017 on a positive note with strong first-quarter results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $1,323 million or $2.16 per share compared with $1,275 million or $2.10 per share in the year-earlier quarter.

The year-over-year improvement in earnings was largely due to higher sales. The reported earnings exceeded the Zacks Consensus Estimate by 9 cents.    

Net sales during the quarter were $7,685 million, up from $7,409 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $7,515 million. Foreign currency translation impact and divestures decreased sales by 0.5% and 0.4%, respectively, while organic local-currency sales improved 4.6%.       

On a geographic basis, organic sales increased 10.1% in Asia Pacific, 4% in EMEA (Europe, Middle East and Africa), 2.3% in Latin America/Canada, and 1.4% in the U.S. From a segment perspective, organic local-currency sales increased 11.5% in Electronics and Energy, 5.7% in Industrial, 4.8% in Safety and Graphics, and 3.1% in Health Care, somewhat offset by a 1.2% decline in Consumer. Operating income in the reported quarter decreased to $1,774 million from $1,788 million in the year-ago-quarter, resulting in respective operating margins of 23.1% and 24.1%.

Segment Results

Industrial segment sales increased 4.2% year over year to $2,709 million as sales improved in all businesses. Operating income increased 0.5% year over year to $625 million, while operating margin was 23.1% compared with 23.9% in first-quarter 2016.

Health Care segment sales improved 2.3% to $1,423 million in the reported quarter, driven by higher sales in drug delivery systems, food safety, oral care, and medical consumables. Operating income decreased 5.2% year over year to $434 million, while operating margin was 30.5% compared with 32.8% in the prior-year period.

Consumer segment revenues were $1,042 million, down 0.7% year over year, driven by decline in stationery and office businesses. Operating income was $222 million, down 6.8% year over year. Operating margin was 21.3% for the reported quarter compared with 22.7% in the year-ago period.

Safety and Graphics segment sales increased 3.4% year over year to $1,527 million, owing to sales growth in roofing granules and commercial solutions. Operating income increased 11.2% to $399 million, while operating margin was 26.1% compared with 24.3% in first-quarter 2016.

Electronics and Energy segment revenues were $1,210 million, up 11.1% year over year due to growth in electronics material solutions and display materials and systems. Organic local-currency sales improved 11.5%. Operating income was up 15.1% year over year to $225 million, while operating margin was 26.9% compared with 17.9% in the year-ago quarter.

3M Company Price, Consensus and EPS Surprise

 

3M Company Price, Consensus and EPS Surprise | 3M Company Quote

Balance Sheet and Cash Flow    

Cash and cash equivalents at quarter end were $2,173 million, while long-term debt stood at $10,802 million. Cash flow from operating activities was $988 million compared with $1,260 million in the year-ago period. Free cash flow generated for the quarter was $701 million, down from $946 million in the prior-year period.  

During the reported quarter, 3M paid $702 million in cash dividends and repurchased $690 million worth of shares.  

Guidance Up

3M raised its earlier guidance for 2017 on strong quarterly results and improved business outlook. The company anticipates 2017 GAAP earnings in the range of $8.70 to $9.05 per share, up from prior projections of $8.45–$8.80. This represents year-over-year growth of 7–11%, up from 4–8% expected earlier. Organic local-currency sales are expected to be 2–5%, up from 1–3% expected earlier, while free cash flow conversion rate is anticipated to be 95–105%.

With continued restructuring activities for a focused portfolio, 3M expects to report relatively healthy results in 2017. 3M currently has a Zacks Rank #2 (Buy). Some favorably-ranked stocks in the industry include Bunzl plc BZLFY, Carlisle Companies Inc. CSL and Crane Co. CR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bunzl has a long-term earnings growth expectation of 7.5%.

Carlisle has a long-term earnings growth expectation of 16% and has a positive earnings surprise history with an average of 11.1% in the trailing four quarters, beating estimates in each.

Crane has a long-term earnings growth expectation of 10.1% and has a positive earnings surprise history with an average of 8.4% in the trailing four quarters, beating estimates in each.

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3M Company (MMM): Free Stock Analysis Report
 
Carlisle Companies Incorporated (CSL): Free Stock Analysis Report
 
Crane Company (CR): Free Stock Analysis Report
 
Bunzl PLC (BZLFY): Free Stock Analysis Report
 
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