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3M Company (MMM - Analyst Report) reported third quarter 2013 net income of $1,230 million or $1.78 per share compared with $1,161 million or $1.65 a share in the year-earlier quarter. The reported earnings beat the Zacks Consensus Estimate of $1.76. The increase in earnings was driven by higher sales across its businesses.

Net sales during the quarter were $7,916 billion, up 5.6% year over year. Quarterly revenues beat the Zacks Consensus Estimate of $7,834 million. The increase in sales was driven by 5.8% organic local currency sales growth and acquisition benefits of 1.5%. However, the positives were partly offset by currency impact of 1.7%. The company reported solid organic local-currency sales growth across all geographic regions.

Operating income for third quarter 2013 was $1.7 billion, while operating margin was 22.0%.

Segment Results

Industrial segment sales increased 8.6% year over year in U.S. dollars to $2.7 billion, driven by a spurt in sales in Latin America/Canada. Organic local-currency sales increased 6.2% year over year due to strong sales in aerospace, industrial adhesives and tapes and liquid filtration.  

Health Care segment sales climbed 5.5% in U.S. dollars to $1.3 billion, aided by positive growth in all major geographic regions. Organic local-currency sales increased 6.8% year over year with healthy growth in health information systems and food safety.

Consumer segment revenues were $1.2 billion, up 2.1% year over year in U.S. dollars as sales increased in all major geographic regions. Organic local-currency sales growth of 4.2% was attributable to consumer health care, stationery and office supplies.

Safety and Graphics segment sales rose 6.7% year over year in U.S. dollars to $1.4 billion with strong performances in Asia Pacific, Latin America/Canada. Organic local-currency sales growth of 8.1% benefited from roofing granules and personal safety

Electronics and Energy segment revenues were $1.4 billion, up 2.5% in U.S. dollars as sales increased in Asia Pacific, Latin America/Canada and EMEA, but declined in the U.S. Organic local-currency sales increased 3.8% driven by sales growth in both electronics and energy related businesses.

Balance Sheet and Cash Flow

Cash and cash equivalents at quarter-end were $2.3 billion compared with $3.0 billion as of Sep 30, 2012. Long-term debt at quarter-end stood at $3,533 million compared with $4,852 million as of Sep, 30 2012. Free cash flow as of Sep 30, 2013 stood at $747 million versus $987 million in the prior-year period. 3M paid $431 million in dividends and repurchased $1.54 billion shares during the reported quarter.


3M expects EPS in the range of $6.65 to $6.75 with an organic local-currency sales growth of 3%-4% in fiscal 2013.  Going forward the company’s position will be strengthened through increased investments in innovation, commercialization and manufacturing.
3M currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look in the industry include Marubeni Corp. , which carries a  Zacks Rank #1 (Strong Buy), and China Merchants Holdings (International) (CMHHY) and Hutchison Whampoa Ltd (HUWHY), each carrying a Zacks Rank #2 (Buy)

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