3M Earnings Cheat Sheet: Shrinking Margins for Fifth Consecutive Quarter, Net Income Falls

S&P 500 (NYSE:SPY) component 3M Company (NYSE:MMM) reported its results for the third 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 Third Quarter

Results: Net income for the diversified machinery company fell to $1.09 billion ($1.52 per share) vs. $1.11 billion ($1.53 per share) a year earlier. This is a decline of 1.6% from the year earlier quarter.

Revenue: Rose 9.6% to $7.53 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: MMM fell short of the mean analyst estimate of $1.61 per share. It fell short of the average revenue estimate of $7.78 billion.

Quoting Management: “The business environment remains challenging, as the economic softening that we experienced late in the second quarter continued into the third,” said George W. Buckley, 3M chairman, president and chief executive officer. “While growth rates were good across much of our portfolio, LCD TV remained weak and momentum slowed in other parts of electronics following several quarters of very good growth. In addition, ongoing policy uncertainty and austerity are affecting growth in Western Europe, which reduced sales in the quarter. As is typical, we are seeing the impact of these changes earlier than most as our customers decrease production in order to lower their inventories. Conversely, we should benefit more quickly when those markets recover.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 1.3 percentage points to 46.5% 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 14.1% to $7.68 billion in the second quarter. The figure rose 15.2% in the first quarter from the year earlier and climbed 9.6% in the fourth quarter of the last fiscal year from the year-ago quarter.

Last quarter’s profit decrease breaks a streak of two consecutive quarters of year-over-year profit increases. Net income rose 3.5% in the second quarter and 16.2% in the first quarter.

The company fell short of estimates last quarter after being in line with expecations the quarter before with net income of $1.60.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.56 per share to $1.47, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from $6.32 a share to $6.19 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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(Source: Xignite Financials)