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Diversified conglomerate 3M Company (MMM - Analyst Report) reported strong fourth quarter 2012 results with a net income of $991 million or $1.41 per share compared to $954 million or $1.35 in the year-earlier quarter. The reported earnings were in sync with the Zacks Consensus Estimate.

For full year 2012, the company reported a net income of $4.4 billion or $6.32 per share compared to $4.3 billion or $5.96 in the prior year. Reported earnings for full year 2012 were in line with the Zacks Consensus Estimate.

Total sales in the reported quarter increased 4.2% year over year to $7.4 billion, which was an all-time fourth-quarter record for the company. Total sales for fourth quarter 2012 exceeded the Zacks Consensus Estimate of $7.2 billion.

The record quarterly sales were led by improved performance by almost all the segments, except Safety, Security and Protection Services segment, which reported a negative top-line growth. The company also reported solid sales across all geographic regions, except EMEA (Europe, Middle East and Africa).

For full year 2012, 3M reported record total sales of $29.9 billion compared to $29.6 billion in 2011. The company witnessed full-year organic local-currency growth in four of its six business segments. On a geographic basis, Latin America/Canada was the fastest-growing region.

Segment Results

Industrial and Transportation segment sales increased 3.8% in U.S. dollars to $2.5 billion driven by a spurt in sales in Latin America/Canada, the U.S. and Asia Pacific. Organic local-currency sales increased 3.9% year over year due to strong sales in liquid filtration, aerospace, industrial adhesives and tapes, abrasives and automotive OEM.  

Health Care segment sales surged 5.6% in U.S. dollars to $1.3 billion, aided by positive growth in all major geographic regions. Organic local-currency sales increased 5.9% year over year with a healthy growth across all business lines, the strongest being food safety, health information systems, skin/wound care and oral care.

Consumer and Office segment revenue was $1.1 billion, up 7.7% year over year in U.S. dollars as sales increased in all major geographic regions. Organic local-currency sales growth of 8.7% was attributable to consumer health care, DIY and stationery and office supply products.

Display and Graphics segment sales rose 10.6% year over year in U.S. dollars to $910 million with a strong performance in Asia Pacific, Latin America/Canada and the U.S. Organic local-currency sales growth of 8.3% benefited from architectural markets, optical system, traffic safety systems and commercial graphics.

Safety, Security and Protection Services segment revenue decreased 2.5% in U.S. dollars to $904 million as sales declined in the U.S. and EMEA. On an organic local-currency basis, sales dipped 1.7% led by a dismal performance in security system products.

Electro and Communications segment revenue was $776 million, up 1% in U.S. dollars as sales increased in Latin America/Canada, the U.S. and Asia Pacific. Organic local-currency sales increased 1.8% due to healthy performances in both electrical and telecom markets.

Balance Sheet and Cash Flow

Cash and cash equivalents at year-end 2012 were $2.9 billion compared to $2.2 billion in the year-ago period. Long-term debt at year-end 2012 increased to $4.9 billion from $4.5 billion in the previous year.

Free cash flow for the three-month period was relatively stable at $1.2 billion compared to the year-ago period. However, on a twelve-month basis, it decreased marginally to $3.8 billion from $3.9 billion at year-end 2011.

Outlook

The company reiterated its earlier guidance for full year 2013 in the range of $6.70 to $6.95 per share with an organic local-currency sales growth of 2%-5%.

3M has been continuously upgrading its product portfolio to fight against stiff competition from leading players such as QLogic Corp. (QLGC - Analyst Report) and Broadcom Corp. (BRCM - Analyst Report). We also remain encouraged by the record top-line growth of the company and expect it to continue its bull run in the coming quarters.

3M currently has a Zacks Rank #3 (Hold). However, we have a Zacks Rank #2 (Buy) for Tyco International Ltd. (TYC - Analyst Report), one of the peers of 3M.

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