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3M Co. (MMM - Analyst Report) released its earnings results for the first quarter of 2011, reporting earnings per share of $1.49, beating the Zacks Consensus Estimate of $1.43. The company’s organic revenues improved in all of its six businesses.


Total revenues for the quarter increased by 15.2% year over year to $7.3 billion. This was ahead of the Zacks Consensus Estimate of $6.9 billion. Organic sales volumes increased by 8.9% in total, led by increases of 20.5% in the Electro and Communications business, 20.3% in Industrial and Transportation, and 14.4%  in Safety, Security and Protection Services. In terms of regions, Asia Pacific was up 21.0%, Latin America/Canada was up 19.5%, Europe grew 13.1% and the United States was up 10.2%.

Revenues in emerging markets were up 24% in the first quarter and comprised 34% of 3M’s worldwide revenues. Sales grew 30% in India, 27% in China/Hong Kong and 25% in Brazil.

For Industrial and Transportation, revenues were $2.5 billion, up 16.9% in local currency, including 3.6% from acquisitions. Healthcare sales were $1.3 billion, up 9.7%, including 5.1% from acquisitions. Revenues of Consumer and Office were $1 billion while Display & Graphics revenues were $943 million. Safety, Security and Protection Services revenues were up 11.3% at $929 million while Electro and Communications clocked $836 million in sales.

First-quarter net income was $1.1 billion, or $1.49 per share, versus $930 million, or $1.29 per share, in 1Q10. Total company operating income margin was 21.6%, with all six business segments at 21% each or higher.

Balance Sheet

The company continues to maintain a sustainable free cash flow position. Cash and equivalents stood at $4.0 billion with long-term debt at $4.5 billion and shareowners' equity at $16.9 billion.


The company expects double-digit sales growth in 2011, with organic sales volume likely to increase 6.0% to 7.5%. 3M increased its 2011 earnings estimate to the range of $6.05 to $6.25 per share from the prior range of $5.95 to $6.20.

The company’s strong results and continued outperformance in emerging markets like China, India, etc. strengthens our conviction that 3M Co. will deliver stronger results ahead. We believe that continued capital expenditure with new product launches should bolster its prospects across most end markets.

The 3M brand is recognized and trusted around the world. Household names like Nexcare, Post-it, Scotch, Scotch-Brite, and Scotchgard are market leaders.

However, results have been impacted by worldwide economic and capital market conditions. Negative consumer sentiment is impacting retail store traffic. On the corporate side, lower employment levels are reducing office supply purchases in most companies.

El DuPont (DD - Analyst Report) is a major competitor.

We currently have a Neutral recommendation on 3M Company.

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