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3M (MMM) Q1 Earnings In Line, Sales Beat Estimates, Up Y/Y

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3M Company (MMM - Free Report) reported solid first-quarter 2018 results, with an impressive year-over-year improvement in adjusted earnings and revenues. GAAP earnings came in at 98 cents per share compared with $2.16 per share in the year-earlier quarter. The year-over-year decline in GAAP earnings despite higher sales was largely due to a pre-tax charge of $897 million or $1.16 per share related to a lawsuit, and a tax expense of $217 million or 36 cents per share.

Excluding non-recurring items, adjusted earnings for the quarter were $2.50, which came in line with the Zacks Consensus Estimate. Notably, the reported figure increased 15.7% on a year-over-year basis.

Net sales came in at $8,278 million, up from $7,685 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $8,079 million. Foreign currency translation impact led to a 4.2% increase in sales, while organic local-currency sales improved 2.8% and acquisitions (net of divestitures) increased sales by 0.7%.

3M Company Price, Consensus and EPS Surprise

3M Company Price, Consensus and EPS Surprise | 3M Company Quote

 

On a geographic basis, total sales were up 10% in Asia Pacific, 4.3% in Latin America/Canada, 3.5% in the United States and 13.7% in EMEA (Europe, Middle East and Africa). From a segment perspective, the metric increased 4.6% in Electronics and Energy, 7% in Health Care, 7.1% in Industrial, 5% in Consumer, and 15% in Safety and Graphics.Operating income in the reported quarter declined to $1,007 million from $1,742 million in the year-ago-quarter, resulting in respective operating margins of 12.2% and 22.7%.

Segmental Details

Industrial segment sales increased 7.1% year over year to $3,144 million backed by an improvement in Asia Pacific, Latin America/Canada and the U.S. regions driven by higher sales of abrasives, automotive and aerospace, and industrial adhesives and tapes products. Operating income was up 7.3% year over year to $719 million and operating margin was recorded at 22.9%.

Health Care segment sales improved 7% year over year to $1,536 million in the reported quarter driven by higher sales in food safety, health information systems, and medical consumables. Operating income increased 7% year over year to $460 million. Operating margin for the segment came in at 29.9%.

Consumer segment sales were $1,127 million, up 5% year over year driven by higher sales in home improvement and home care. Operating income was $218 million, down 2.4% year over year. Operating margin for the segment was recorded at 19.3%.

Safety and Graphics segment sales increased 15% year over year to $1,783 million, owing to higher sales in personal safety, roofing granules as well as commercial solutions. Operating income increased 21.1% year over year to $483 million and operating margin was recorded at 27.1%.

Electronics and Energy segment sales were $1,350 million, up 4.6% year over year owing to growth in electronics materials solutions. Operating income was up 31.3% year over year to $337 million. Operating margin for the segment came in at 24.9%.

Balance Sheet

Cash and cash equivalents at the end of the reported quarter were $3,491 million compared with $2,173 million in the prior-year period. Long-term debt came in at $12,211 million compared with $12,096 million at year-end 2017.

Net cash provided by operating activities was $143 million compared with $988 million in the year-ago period. 

In the first quarter, 3M paid $810 million in cash dividends and repurchased shares worth $937 million.  

Outlook Updated

3M revised its earlier guidance for 2018. The company currently anticipates earnings in the range of $10.20-$10.55 per share compared with prior projections of $10.20-$10.70. Organic sales growth is expected to be in the band of 3-4%.

Zacks Rank & Stocks to Consider

3M has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Federal Signal Corporation (FSS - Free Report) , Raven Industries, Inc. (RAVN - Free Report) and Danaher Corporation (DHR - Free Report) . While Federal Signal sports a Zacks Rank #1 (Strong Buy), Raven Industries and Danaher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federal Signal has an excellent earnings surprise history. The company surpassed estimates in the trailing four quarters, with an average beat of 16.5%.

Raven Industries has a modest earnings surprise history. The company exceeding estimates thrice in the trailing four quarters, with an average beat of 20.2%.

Danaher has an impressive earnings surprise history. The company outpaced estimates in the trailing four quarters, with an average beat of 4.1%.

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