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3M (MMM) Closes Safety Prescription Eyewear Unit Divesture
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Diversified industrial goods manufacturer 3M Company (MMM - Free Report) has recently completed the divesture of its prescription eyewear business to HOYA Vision Care, a premier eyeglass lens provider across the globe, for an undisclosed amount. 3M decided to sell the business to focus on its core personal safety businesses. The company, however, retained its non-prescription eyewear business that is widely known as the plano eyewear.
The divested business was part of the Personal Safety Division, which is an integral component of the Safety & Graphics segment. The prescription eyewear business offered a wide array of frames, prescription lenses and premium coating solutions on customized products. The business employed approximately 140 employees and generated annual global sales to the tune of $45 million. These employees have been absorbed by HOYA.
Since 2012 to early 2016, 3M has pruned its businesses from 40 to 26, thereby improving customer relevance, productivity and speed through a leaner operating structure. At the same time, it has maintained a steady investment in R&D to develop innovative products. The company invested approximately $1.8 billion in R&D in 2016 for higher organic growth and complemented it through strategic acquisitions.
Despite the portfolio restructuring efforts, 3M is currently going through a lean patch with an average return of 4.0% in the last 90 days compared with 5.9% for the Zacks categorized Diversified Operations industry. This Zacks Rank #3 (Hold) stock appears to be grappling with numerous challenges that are likely to weigh on its performance in the forthcoming quarters.
The earnings estimates of the company for fourth-quarter 2016 have decreased to $1.87 per share from $1.96 in the last 90 days with significant downward revisions. The earnings estimates for full-year 2016 have also reduced from $8.22 to $8.16 per share in the last three months, signifying negative investor confidence.
3M also expects a lackluster performance in the fourth quarter and has narrowed its earlier guidance for 2016 during the third-quarter earnings release. Organic local-currency sales is expected to be flat compared with 0–1% growth expected earlier. The company currently anticipates 2016 GAAP earnings in the range of $8.15 to $8.20 per share compared with the earlier projection of $8.15 to $8.30.
However, during the five-year period of 2016–2020, 3M expects 8–11% growth in earnings per share driven by an organic sales growth of 2–5%. The company expects about 20% return on invested capital during this tenure with a free cash flow conversion rate of 100%. Furthermore, 3M is standardizing its business processes through a new, global ERP system. The company expects these efforts to result in $500 to $700 million in annual operational savings by 2020, and an additional $500 million reduction in working capital. Whether such focused attempts will revive its growth momentum in the future remains to be seen.
Carlisle has a long-term earnings growth expectation of 16% and has beaten estimates in each of the trailing four quarters for an average earnings surprise of 13.5%.
HC2 Holdings has beaten estimates once in the trailing four quarters for an average positive earnings surprise of 35.8%.
Hitachi has long-term earnings growth expectation of 13% and has beaten estimates twice in the trailing four quarters for an average positive earnings surprise of 145.6%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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3M (MMM) Closes Safety Prescription Eyewear Unit Divesture
Diversified industrial goods manufacturer 3M Company (MMM - Free Report) has recently completed the divesture of its prescription eyewear business to HOYA Vision Care, a premier eyeglass lens provider across the globe, for an undisclosed amount. 3M decided to sell the business to focus on its core personal safety businesses. The company, however, retained its non-prescription eyewear business that is widely known as the plano eyewear.
The divested business was part of the Personal Safety Division, which is an integral component of the Safety & Graphics segment. The prescription eyewear business offered a wide array of frames, prescription lenses and premium coating solutions on customized products. The business employed approximately 140 employees and generated annual global sales to the tune of $45 million. These employees have been absorbed by HOYA.
Since 2012 to early 2016, 3M has pruned its businesses from 40 to 26, thereby improving customer relevance, productivity and speed through a leaner operating structure. At the same time, it has maintained a steady investment in R&D to develop innovative products. The company invested approximately $1.8 billion in R&D in 2016 for higher organic growth and complemented it through strategic acquisitions.
Despite the portfolio restructuring efforts, 3M is currently going through a lean patch with an average return of 4.0% in the last 90 days compared with 5.9% for the Zacks categorized Diversified Operations industry. This Zacks Rank #3 (Hold) stock appears to be grappling with numerous challenges that are likely to weigh on its performance in the forthcoming quarters.
The earnings estimates of the company for fourth-quarter 2016 have decreased to $1.87 per share from $1.96 in the last 90 days with significant downward revisions. The earnings estimates for full-year 2016 have also reduced from $8.22 to $8.16 per share in the last three months, signifying negative investor confidence.
3M also expects a lackluster performance in the fourth quarter and has narrowed its earlier guidance for 2016 during the third-quarter earnings release. Organic local-currency sales is expected to be flat compared with 0–1% growth expected earlier. The company currently anticipates 2016 GAAP earnings in the range of $8.15 to $8.20 per share compared with the earlier projection of $8.15 to $8.30.
However, during the five-year period of 2016–2020, 3M expects 8–11% growth in earnings per share driven by an organic sales growth of 2–5%. The company expects about 20% return on invested capital during this tenure with a free cash flow conversion rate of 100%. Furthermore, 3M is standardizing its business processes through a new, global ERP system. The company expects these efforts to result in $500 to $700 million in annual operational savings by 2020, and an additional $500 million reduction in working capital. Whether such focused attempts will revive its growth momentum in the future remains to be seen.
Some better-ranked stocks in the industry include Carlisle Companies Incorporated (CSL - Free Report) , HC2 Holdings, Inc. and Hitachi, Ltd. (HTHIY - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Carlisle has a long-term earnings growth expectation of 16% and has beaten estimates in each of the trailing four quarters for an average earnings surprise of 13.5%.
HC2 Holdings has beaten estimates once in the trailing four quarters for an average positive earnings surprise of 35.8%.
Hitachi has long-term earnings growth expectation of 13% and has beaten estimates twice in the trailing four quarters for an average positive earnings surprise of 145.6%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>