3M Company Earnings: Fifth Straight Quarter of Shrinking Margins, but Profit Rises

S&P 500 (NYSE:SPY) component 3M Company (NYSE:MMM) reported its results for the fourth quarter. 3M is a global manufacturer, technology innovator, and marketer of a variety of products.

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3M Company Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the diversified machinery company rose to $954 million ($1.35 per share) vs. $928 million ($1.28 per share) in the same quarter a year earlier. This marks a rise of 2.8% from the year earlier quarter.

Revenue: Rose 5.7% to $7.09 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: MMM beat the mean analyst estimate of $1.31 per share. Analysts were expecting revenue of $7.09 billion.

Quoting Management: “2011 was a successful year for 3M, with record sales and earnings per share,” said George W. Buckley, 3M chairman, president and chief executive officer. “We were resilient enough to achieve these results in the face of deteriorating demand in both Western Europe and consumer electronics. Our commitment to the future continued, with investments of $1.6 billion in research and development and $1.4 billion in capital expenditures during the year, aimed primarily at faster growing markets. Our 2011 results demonstrate the underlying strength of 3M’s business model, as we once again generated double-digit top-line growth and premium return on capital. My thanks to 3Mers everywhere for another outstanding year.”

Buckley continued, “Looking ahead, we believe that slower growth will persist into the first half of 2012, so we will increase attention to the bottom line in the near term. We know that in uncertain times, it is even more important that we innovate and differentiate ourselves, therefore we will preserve key investments in R&D, sales and manufacturing to achieve accelerated growth.”

3M affirmed its 2012 full-year performance expectations. The company expects earnings to be in the range of $6.25 to $6.50 per share with organic sales volume growth of two to five percent. Operating income margins are expected to be between 21 and 22.5 percent for the year.

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.7 percentage point to 46.1% from the year earlier quarter. Over that time, margins have contracted on average 1.2 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 9.6% to $7.53 billion in the third quarter. The figure rose 14.1% in the second quarter from the year earlier and climbed 15.2% in the first quarter from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the third quarter with net income of $1.52 versus a mean estimate of net income of $1.61 per share.

Net income has increased 4% year over year on average across the last five quarters. The biggest gain came in the first quarter, when income climbed 16.2% from the year earlier quarter.

Looking Forward: Analysts have a more positive outlook about the company’s results for next quarter. The average estimate for first quarter of the next fiscal year is $1.53 per share, an increase from $1.51 sixty days ago. For the fiscal year, the average estimate has moved down from $5.94 a share to $5.93 over the last ninety days.

Competitors to Watch: General Electric Company (NYSE:GE), Danaher Corporation (NYSE:DHR), Johnson & Johnson (NYSE:JNJ), DENTSPLY Intl. Inc. (NASDAQ:XRAY), Tyco International Ltd. (NYSE:TYC), Carlisle Companies, Inc. (NYSE:CSL), Honeywell Intl. Inc. (NYSE:HON), Siemens AG (NYSE:SI), and E.I. du Pont de Nemours & Co. (NYSE:DD).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

 

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com