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3M's Earnings Beat, Sales at Record High

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3M Company (MMM - Free Report) reported record results with second quarter 2013 net sales of $7.8 billion, improving from $7.5 billion in the year-ago quarter. The superior performance was attributable to 2.3% organic local-currency sales growth and acquisition benefits of 1.9%.

Except a negative top-line growth in Electronics and Energy segment, all other segments reported improved performance and led to the record quarterly sales. The company reported solid organic local-currency sales growth across all geographic regions. Quarterly revenues also beat the Zacks Consensus Estimate of $7.7 billion.

Net income for the reported quarter was $1,197 million or $1.71 per share compared with $1,167 million or $1.66 in the year-earlier quarter. The reported earnings beat the Zacks Consensus Estimate of $1.70. Operating income for second quarter 2013 was $1.7 billion, while operating margin was 22.0%.

Segment Results

Industrial segment sales increased 6.6% year over year in U.S. dollars to $2.7 billion, driven by a spurt in sales in Latin America/Canada, the U.S. and EMEA (Europe, Middle East and Africa). Organic local-currency sales increased 3.3% year over year due to strong sales in aerospace, industrial adhesives and tapes and liquid filtration.  

Health Care segment sales climbed 4.6% in U.S. dollars to $1.3 billion, aided by positive growth in all major geographic regions. Organic local-currency sales increased 5.7% year over year with healthy growth across all business lines - the strongest being health information systems, food safety, critical and chronic care, oral care and infection prevention.

Consumer segment revenues were $1.1 billion, up 1.4% year over year in U.S. dollars as sales increased in all major geographic regions. Organic local-currency sales growth of 2.9% was attributable to consumer health care, stationery and office supplies.

Safety and Graphics segment sales rose 2.3% year over year in U.S. dollars to $1.5 billion with strong performances in Asia Pacific, Latin America/Canada and EMEA. Organic local-currency sales growth of 2.0% benefited from architectural markets, building and commercial services, and traffic safety.

Electronics and Energy segment revenues were $1.3 billion, down 3.2% in U.S. dollars as sales dipped in EMEA, the U.S. and Asia Pacific. Organic local-currency sales decreased 2.1% as end market remained soft throughout the quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents at quarter-end were $2.9 billion compared with $2.8 billion as of Dec 31, 2012. Long-term debt at quarter-end increased to $4,884 million compared with $4,916 million as of Dec, 31 2012. Free cash flow as of Jun 30, 2013 increased to $1,285 million versus $1,031 million in the prior-year period. 3M paid $436 million in dividends and repurchased $1.2 billion shares.


3M expects EPS in the range of $6.60 to $6.85 with an organic local-currency sales growth of 2%-5% in fiscal 2013. The company is expected to repurchase $3.5 billion to $4.5 billion worth of shares, versus a previous range of $2 billion to $3 billion.

MMM currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth a look in the industry include Hutchison Whampoa Ltd. , Macquarie Infrastructure Company LLC (MIC - Free Report) and United Technologies Corp. (UTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

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