It has been about a month since the last earnings report for 3M Company (MMM - Free Report) . Shares have lost about 1.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is MMM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
3M Q1 Earnings In Line, Sales Beat Estimates, Up Y/Y
3M 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%.
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%.
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%.
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.
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%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
At this time, MMM has a poor Growth Score of F. Its Momentum is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise MMM has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.