3M Company (MMM) reported fourth-quarter 2014 net income of $1,179 million or $1.81 per share compared with $1,103 million or $1.62 in the year-earlier quarter. The reported earnings per share beat the Zacks Consensus Estimate of $1.79. The increase in earnings was driven by higher sales.
For full-year 2014, the company recorded net income of $4,956 million or $7.49 per share versus $4,659 million or $6.72 per share in the year-ago period. The reported earnings per share beat the Zacks Consensus Estimate of $7.45.
Net sales during the quarter were $7,719 million, up 2.0 % year over year but below the Zacks Consensus Estimate of $7,779 million. The year-over-year increase in sales was driven by 6.3% organic local currency sales growth and 0.1% impact of acquisitions, partially offset by currency impact of 4.4%. Operating income for fourth-quarter 2014 was $1.7 billion, while operating margin was 21.5%.
For full-year 2014, revenues were $31,821 million compared with $30,871 million in the year-ago period. Full-year 2014 revenues missed the Zacks Consensus Estimate of $32,021 million. The year-over-year increase in sales was driven by 4.9% organic local currency sales growth, partially offset by currency impact of 1.9%. Full-year 2014 operating income margins were 22.4%, up 0.8% year over year.
Segment Results
Industrial segment sales increased 1.4% year over year in local currency to $2.6 billion in the reported quarter driven by an increase in sales in all major geographies. Organic local-currency sales increased 5.9% year over year due to strong sales in advanced materials, aerospace and commercial transportation, industrial adhesives and tapes and automotive aftermarket.
Health Care segment sales climbed 2.4% in local currency to $1.4 billion in the reported quarter, aided by growth in all major geographic regions. Organic local-currency sales increased 6.4% year over year with growth in health information systems, food safety, infection prevention and chronic care.
Consumer segment revenues were $1.1 billion in the reported quarter, up 2.2% year over year in local currency. driven by increase in sale in all geographies except EMEA regions. Organic local-currency sales growth of 5.8% was attributable to consumer health care and home care businesses.
Safety and Graphics segment sales rose 3.4% year over year in local currency to $1.4 billion with strong performances in Asia Pacific, Latin America/Canada and EMEA regions. Organic local-currency sales growth of 9.2% benefited from personal safety and commercial solutions businesses.
Electronics and Energy segment revenues were $1.4 billion in the reported quarter, up 3.3% in local currency as sales increased in Latin America/Canada, Asia Pacific and EMEA while it was flat in the U.S year over year. Organic local-currency sales edged up 6.2% driven by strong growth in display materials and systems and electronics materials solutions.
Balance Sheet and Cash Flow
Cash and cash equivalents as of Dec 31, 2014 were $1,897 million compared with $2,581 million as of Dec 31, 2013. Long-term debt stood at $6,731 million as of Dec 31, 2014 compared with $4,326 million as of Dec, 31 2013. Free cash flow as of Dec 31, 2014 stood at $5,133 million versus $4,152 million in the prior-year period.
For full year 2015, 3M paid $2.2 billion in cash dividends to shareholders and repurchased $5.7 billion of its shares. For full year 2015, 3M converted 104% of net income to free cash flow for the year and generated 22% return on invested capital. The company also announced first quarter 2015 dividend per share increase of 20%.
Outlook
3M affirmed its 2015 full-year guidance. The company expects earnings per share to be in the range of $8.00 to $8.30 with organic local-currency sales growth of 3% to 6% for full-year 2015. 3M also expects free cash flow conversion to be in the range of 90% to 100%
3M currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look include Federal Signal Corp. (FSS) Graco Inc. (GGG) and Kadant Inc. (KAI), all carrying a Zacks Rank #2 (Buy).
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