Diversified conglomerate 3M Company (MMM) recently reiterated its long-term outlook in an investor presentation, based on healthy productivity gains and solid organic-growth driven model. At the same time, the company offered specific earnings guidance for 2015 and announced a dividend hike for the first quarter. All these factors seemed to have raised investor confidence as share prices were up 1.4% ($2.20) to close at $159.05 as on Dec 16, 2014.
For the five-year period from 2013−17, 3M affirmed its financial objectives and remained confident of achieving its set targets. These include average earnings per share growth of 9%−11% per year, average organic sales growth of 4%−6% per year, a 20% return on invested capital and 100% conversion of net income to free cash flow.
Portfolio management, investment in innovation, and business transformation are the three key levers on which the company intends to focus moving forward. 3M will also continue to invest in capital expenditures and research and development to support organic growth as it aims at a capital structure strategy and increased capital deployment.
For 2015, 3M expects earnings in the range of $8.00 to $8.30 per share, with organic local currency sales growth of 3%−6% and free cash flow conversion of 90%−100%. The current Zacks Consensus Estimate for 2015 is pegged at the higher end of the guidance at $8.20.
The company also increased its first-quarter 2015 dividend by 20% year over to $1.025 per share. The proposed dividend is payable on Mar 12 to shareholders of record as of Feb 13. The current dividend hike is the 57th consecutive annual dividend increase for the company and the 98th uninterrupted yearly dividend payment. Based on the closing price of $159.05, the proposed dividend affirms a yield of 2.58%.
3M's global footprint, diversified product portfolio and the ability to penetrate into different markets are likely to augment its revenues in the long term. We also remain encouraged by the bullish outlook of the company and its continued efforts to reward shareholders with risk-adjusted returns.
3M currently has a Zacks Rank #3 (Hold). Other stocks that look promising in the industry include Federal Signal Corp (FSS) carrying a Zacks Rank #1 (Strong Buy), and Carlisle Companies Inc. (CSL) and EnPro Industries, Inc. (NPO), both carrying a Zacks Rank #2 (Buy).
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