3M Company (MMM - Free Report) reported better-than-expected results for the fourth quarter of 2018, pulling off a positive earnings surprise of 1.76%.
The company’s adjusted earnings in the reported quarter were $2.31 per share, surpassing the Zacks Consensus Estimate of $2.27. On a year-over-year basis, bottom-line results increased 10%, driven by decrease in costs and operating expenses, other expenses and tax expenses.
For 2018, 3M’s adjusted earnings per share were $10.46, surpassing the Zacks Consensus Estimate of $9.94 and marking roughly 14.4% increase over the year-ago tally of $9.17.
Divestitures and Forex Woes Hurt Revenues
In the quarter under review, 3M’s net sales were $7,945 million, reflecting a decline of 0.6% from the year-ago quarter. Results were adversely impacted by 1.3% negative impact from divestitures and 2.3% adverse impact from foreign currency translation, partially offset by 3% growth in organic sales.
Also, the top line surpassed the Zacks Consensus Estimate of $7.94 billion.
On a geographical basis, sales in the United States increased 3.3% year over year while that generated in the Asia Pacific decreased 0.8%. Europe, Middle East and Africa’s sales declined 6.4% and that from Latin America/Canada slipped 2.8%.
The company reports net sales under five segments — Industrial, Safety and Graphics, Health Care, Electronics and Energy, and Consumer. The segmental information is briefly discussed below:
Revenues from the Industrial segment were $2,952 million, decreasing 0.3% year over year. Results were adversely influenced by 2.7% negative impact from foreign currency translations and 0.1% adverse impact from divestitures, partially offset by 2.5% growth in organic sales.
Revenues from the Safety and Graphics segment totaled $1,569 million, increasing 0.3% year over year. The improvement came on the back of 3.3% gain from organic sales growth, partially offset by 2.8% adverse impact of forex woes and 0.2% negative impact of divestitures.
Revenues from the Health Care segment were $1,520 million, reflecting growth of 2.4% year over year. While organic sales grew 4.8%, unfavorable currency translation impacted sales adversely by 2.4%.
Revenues from the Electronics and Energy segment totaled $1,342 million, decreasing 4.5% year over year. Results were adversely impacted by 7.1% negative impact from divestitures and 1.5% from forex woes, partially offset by 4.1% organic growth.
Revenues from the Consumer segment inched up 0.1% year over year to $1,211 million. The improvement came on the back of 1.9% gain from organic sales growth, offset by 1.8% adverse impact of forex woes.
For 2018, the company’s sales were $32,765 million, reflecting growth of 3.5% from the year-ago tally. However, the top line fell short of the Zacks Consensus Estimate of $32.79 billion.
Margin Flat Y/Y, Costs Decrease
In the quarter under review, 3M’s cost of sales decreased 0.8% year over year to $4,060 million. It represented 51.1% of net sales compared with 51.2% in the year-ago quarter. Selling, general and administrative expenses decreased 4.2% year over year to $1,682 million. It represented 21.2% of net sales versus 22% in the year-ago quarter. Research, development and related expenses were $437 million. It represented 5.5% of net sales versus 5.6% in the year-ago quarter.
Adjusted operating income in the quarter under review slipped 0.3% year over year to $1,783 million. Operating margin was flat year over year at 22.4%. Other expenses in the quarter declined 46.2% and tax provisions decreased 67.7%. Adjusted tax rate in the quarter was 20.5% versus 23% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter, 3M’s cash and cash equivalents were $2,853 million, down 10.4% from $3,185 million at the end of the last reported quarter. Long-term debt balance decreased 0.9% sequentially to $13,411 million.
In the reported quarter, the company generated net cash of $2,258 million, increasing 21.4% year over year. Capital used for purchasing property, plant and equipment increased 15.7% year over year to $531 million. Free cash flow generated was $1,727 million, increasing 23.3% year over year.
During the year, the company used $3,193 million for paying dividends to shareholders while repurchased $4,870 million shares.
Outlook
For 2019, 3M revised down adjusted earnings guidance from $10.60-$11.05 to $10.45-$10.90 per share. The revision includes adverse impact of 10 cents related to the acquisition of M??? Modal’s technology business. Tax rate is likely to be 20-22%.
Organic sales growth guidance has been revised from 2-4% to 1-4%. Acquisitions, net of impact from divested assets, will have a neutral impact while forex woes will hurt sales by 1%. Capital expenditure will total $1.7-$1.9 billion. Further, shares worth $2-$4 billion will likely be repurchased during 2019. Return on invested capital will likely be 22-25% and free cash flow conversion will be 95-105%.
3M Company Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
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3M Company (MMM - Free Report) reported better-than-expected results for the fourth quarter of 2018, pulling off a positive earnings surprise of 1.76%.
The company’s adjusted earnings in the reported quarter were $2.31 per share, surpassing the Zacks Consensus Estimate of $2.27. On a year-over-year basis, bottom-line results increased 10%, driven by decrease in costs and operating expenses, other expenses and tax expenses.
For 2018, 3M’s adjusted earnings per share were $10.46, surpassing the Zacks Consensus Estimate of $9.94 and marking roughly 14.4% increase over the year-ago tally of $9.17.
Divestitures and Forex Woes Hurt Revenues
In the quarter under review, 3M’s net sales were $7,945 million, reflecting a decline of 0.6% from the year-ago quarter. Results were adversely impacted by 1.3% negative impact from divestitures and 2.3% adverse impact from foreign currency translation, partially offset by 3% growth in organic sales.
Also, the top line surpassed the Zacks Consensus Estimate of $7.94 billion.
On a geographical basis, sales in the United States increased 3.3% year over year while that generated in the Asia Pacific decreased 0.8%. Europe, Middle East and Africa’s sales declined 6.4% and that from Latin America/Canada slipped 2.8%.
The company reports net sales under five segments — Industrial, Safety and Graphics, Health Care, Electronics and Energy, and Consumer. The segmental information is briefly discussed below:
Revenues from the Industrial segment were $2,952 million, decreasing 0.3% year over year. Results were adversely influenced by 2.7% negative impact from foreign currency translations and 0.1% adverse impact from divestitures, partially offset by 2.5% growth in organic sales.
Revenues from the Safety and Graphics segment totaled $1,569 million, increasing 0.3% year over year. The improvement came on the back of 3.3% gain from organic sales growth, partially offset by 2.8% adverse impact of forex woes and 0.2% negative impact of divestitures.
Revenues from the Health Care segment were $1,520 million, reflecting growth of 2.4% year over year. While organic sales grew 4.8%, unfavorable currency translation impacted sales adversely by 2.4%.
Revenues from the Electronics and Energy segment totaled $1,342 million, decreasing 4.5% year over year. Results were adversely impacted by 7.1% negative impact from divestitures and 1.5% from forex woes, partially offset by 4.1% organic growth.
Revenues from the Consumer segment inched up 0.1% year over year to $1,211 million. The improvement came on the back of 1.9% gain from organic sales growth, offset by 1.8% adverse impact of forex woes.
For 2018, the company’s sales were $32,765 million, reflecting growth of 3.5% from the year-ago tally. However, the top line fell short of the Zacks Consensus Estimate of $32.79 billion.
Margin Flat Y/Y, Costs Decrease
In the quarter under review, 3M’s cost of sales decreased 0.8% year over year to $4,060 million. It represented 51.1% of net sales compared with 51.2% in the year-ago quarter. Selling, general and administrative expenses decreased 4.2% year over year to $1,682 million. It represented 21.2% of net sales versus 22% in the year-ago quarter. Research, development and related expenses were $437 million. It represented 5.5% of net sales versus 5.6% in the year-ago quarter.
Adjusted operating income in the quarter under review slipped 0.3% year over year to $1,783 million. Operating margin was flat year over year at 22.4%. Other expenses in the quarter declined 46.2% and tax provisions decreased 67.7%. Adjusted tax rate in the quarter was 20.5% versus 23% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter, 3M’s cash and cash equivalents were $2,853 million, down 10.4% from $3,185 million at the end of the last reported quarter. Long-term debt balance decreased 0.9% sequentially to $13,411 million.
In the reported quarter, the company generated net cash of $2,258 million, increasing 21.4% year over year. Capital used for purchasing property, plant and equipment increased 15.7% year over year to $531 million. Free cash flow generated was $1,727 million, increasing 23.3% year over year.
During the year, the company used $3,193 million for paying dividends to shareholders while repurchased $4,870 million shares.
Outlook
For 2019, 3M revised down adjusted earnings guidance from $10.60-$11.05 to $10.45-$10.90 per share. The revision includes adverse impact of 10 cents related to the acquisition of M??? Modal’s technology business. Tax rate is likely to be 20-22%.
Organic sales growth guidance has been revised from 2-4% to 1-4%. Acquisitions, net of impact from divested assets, will have a neutral impact while forex woes will hurt sales by 1%. Capital expenditure will total $1.7-$1.9 billion. Further, shares worth $2-$4 billion will likely be repurchased during 2019. Return on invested capital will likely be 22-25% and free cash flow conversion will be 95-105%.
3M Company Price, Consensus and EPS Surprise
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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