Can 3M (NYSE: MMM) Beat Analysts’ Estimates? – Q4 FY 2010 Earnings On January 25
Monday, January 24, 2011 11:14 AM

US-based diversified technology company 3M Co. (NYSE: MMM) is scheduled to report its earnings on January 25, 2011. In the last three quarters ended September 2010, 3M's reported EPS exceeded analysts' consensus estimates by margins in the range of 1.30 percent and 15.70 percent.

3M has a global presence in the following businesses: Industrial and Transportation, Health Care, Consumer and Office, Safety, Security and Protection Services, Display and Graphics, and Electro and Communications.

In April 2010, the company acquired a majority stake in the A-One branded consumer and office label business, and related operations. In May 2010, the company acquired J.R. Phoenix Ltd and in July 2010, 3M Company acquired Dailys Ltd. On December 1, 2010, 3M has completed its acquisition of Cogent, Inc. Under the terms of the merger agreement, Cogent's stockholders are entitled to receive $10.50 per share in cash.

For the first quarter, 3M reported earnings of $1.29 per share on sales of $6.3 billion. Operating income margin was 22.8 percent, up 7 percentage points year-on-year. Sales and per-share earnings increased 24.7 percent and 74.3 percent, respectively, compared to the first quarter of 2009. The first quarter of FY 2010, saw increased sales, boosted by better market penetration and significant growth in important end-markets.

For the second quarter, 3M reported earnings of $1.54 per share on sales of $6.7 billion. Sale and per-share earnings increased 17.7 percent and 37.5 percent, respectively, compared to the second quarter of FY 2009. 3M generated record operating income of $1.596 billion and operating margins were 23.7 percent. 3M's sales improved in all businesses and geographic regions. Total sales for the company rose by 18 percent year-on-year and 6 percent sequentially.

For the third quarter, 3M reported record earnings of $1.53 per share on sales of $6.9 billion. Sales and earnings per share increased 11 percent and 13.3 percent, respectively, compared to the third quarter of FY 2009. Operating income for the quarter was $1.576 billion and operating margins were 22.9 percent. The growth in the third quarter was attributed to new products fuelling market share gains and filling adjacent spaces, particularly in the emerging-markets.

After the excellent performance in the first three quarters of FY 2010, 3M raised full-year 2010 expectations. The company expects full-year organic sales growth volume to be in the range of 13.5 to 14 percent and operating margins to equal approximately 22.5 percent for the year. The company expects earnings to be in the range of $5.65 - $5.80 per share for FY 2010.

In February 2007, 3M's board of directors authorized a two-year share repurchase of up to $7.0 billion for the period from February 12, 2007 to February 28, 2009. In February 2009, 3M's board extended this share repurchase authorization until the remaining $2.6 billion (as of December 31, 2009) is fully utilized. On November 8, 2010, 3M's board declared a dividend on the company's common stock of $0.525 cents per share for the fourth quarter of 2010. This cash dividend is the 377th consecutive quarterly dividend paid by 3M.

For the fourth quarter ended December 31, 2010, analysts' estimates of earnings range from a low of $1.24 per share to a high of $1.27 per share, compared to the consensus estimate of $1.26 per share or $1.30 per share earned in the year ago quarter. Analysts' revenue estimates for the fourth quarter range from a low of $6.48 billion to a high of $6.89 billion, compared to a consensus estimate of $6.62 billion or $6.12 billion reported in the same quarter a year ago. For the quarter ended December 31, 2010, the consensus EPS forecast has been downgraded to the current estimate of $1.26 per share from $1.28 per share estimated two months ago.

3M competes with companies like Avery Dennison Corporation (NYSE: AVY) and El DuPont de Nemours & Co. (NYSE: DD). In the last one year, Avery reported earnings of $2.38 per share on revenues of $6.40 billion and, on the other hand, El DuPont earned $3.37 per share on revenues of $31.31 billion.

In comparison to the industry, 3M has a P/E ratio of 15.59, which is higher than the industry's P/E of 14.13. The P/S ratio of the company is 2.42, compared to P/S of 0.88 for the industry. The company's quarterly revenue growth is at 11 percent against industry's quarterly revenue growth of 11.90 percent. In the last 52 weeks, 3M's stock has been trading in the range of $68.96 to $90.52. In the last one year, 3M's stock has gained 8 percent to reach $88.10 on January 14, 2011, from $81.28 on January 15, 2010. Based on the EPS estimates and key financials of the company, I see a one year target price of $96.



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