3M Earnings Up on Record Revenues
Diversified conglomerate 3M Company (MMM) 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) and Broadcom Corp. (BRCM). 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), one of the peers of 3M.
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